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CONTRACTS 



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CONTRACTS 



IN 



ENGINEERING 



THE INTERPRETATION AND WRITING OF 

ENGINEERING-COMMERCIAL 

AGREEMENTS 



AN ELEMENTARY TEXT-BOOK FOR STUDENTS 

IN ENGINEERING, ENGINEERS, CONTRACTORS 

AND BUSINESS MEN 



BY 

JAMES IRWIN TUCKER, B.S., LL.B. 

Member Boston Society of Civil Engineers, and Assistant Professor 
IN Civil Engineering at Tufts College 



" The law does not consist of particular cases, but 
of general principles which are illustrated and ex- 
plained by these cases." — Lord Mansfield. 



FIRST EDITION 
First Thousand 



McGRAW-HILL BOOK COMPANY 

239 WEST 39TH STREET, NEW YORK 
6 BOUVERIE STREET, LONDON, E.G. 

1910 



% 



^^x 



% 



Copyright by 

James Irwin Tucker 

1910 



The Plimpton Press Norwood Mass. U.S.A. 



Ci.A27 1S72 






PREFACE 

In view of the prefatory form of Chapter I, extended remarks 
are not desirable here. There are, however, a few points to which 
t-f ^tteQtu>n i^ directed. 

The author beheves that it is better for the engineer to have 
even a Httle information than for him to be wholly uninformed 
upon legal matters. The author has been warned against leading 
the reader or student to infer that the services of legal counsel 
might easily be dispensed with. This result he especially dis- 
claims, and he feels, moreover, that a candid scrutiny of his work 
will show that the aim has been to enable the engineer to co- 
operate efficiently with lawyers and to appreciate better the need 
for their services. 

Present Aim and Scope of Work. — This book aims especially 
to familiarize the engineering student with the major principles of 
common law relating to CONTRACTS, and touches other legal 
branches only incidentally and so far as will materially assist him 
to grasp the doctrines of contract law applying to that subject. 
To many engineers the only justification for this book may lie in 
an acceptable restatement of the principles underlying successful 
specification writing. The great importance of this field has been 
recognized, and fully a third of the book devoted to it. But with 
the present commercial tendency of engineering, it is believed 
that the contracts of business demand the modern engineer'^ 
attention about equally with those of engineering construction. 
About one-third of the book, therefore, deals with commercial 
contracts, while the balance deals with elementary principles 
common to all contracts, and the interrelations between contracts, 
torts, agency, and real property. 

Reasons for Present Undertaking. — The first reason is a belief 
that a considerable number of elementary legal principles should 
be stated in brief compass for class-room work. While of legal 
treatises there are a plenty, a text suitable for the special require- 
ments of an engineering school does not exist, since this feature 
of class-room utility precludes the more monumental works on 
engineering jurisprudence and aUied subjects. In the pressure 
of an engineering course the student often finds that he can ill 



PREFACE 

afford the larger works, and probably if he does buy them he finds 
himself lost in attempting their use. This is due to their tre- 
mendous array of formidable and intricate propositions, or what 
seem to be such for want of a simple and brief statement of the 
spirit of the law which underHes whole groups of cases. Generally 
he has no one to state the guiding principle for him, — a thing 
this book especially aims to do. 

The writer has found his preparation for the present task in 
some fourteen years of the study, practice, and teaching of civil 
engineering. The pursuit of a law course in the Boston Evening 
Law School, coupled with contemporaneous teaching in Tufts 
College, has made a combination highly stimulating, and withal, 
highly laborious. Of its effectiveness, the present work will speak. 
In 1908 he was asked to give the course in Contracts and Speci- 
fications, and in conducting this class, much of the present material 
was prepared. This experience was of great value, since it in- 
dicated the limits of the ordinary student^s information upon the 
subject matter, — it also proved his keen interest in it. The 
experience also indicated fairly well what could be done in the 
time generally available for this subject in most engineering 
schools. 

Arrangement as a Textbook. — In outlining the various topics, 
where too many details or correlated ideas develop, recourse is 
had to Appendix Notes. The best students as well as non-legally 
trained teachers will find these Notes equally valuable with the 
main text ; but the average student will be able to get continuity 
of development without much recourse to them. The free use 
of bold face type, of numbered section titles, and of italics, makes 
the book more valuable for reference. A comprehensive index 
adds to its value for purposes of reference. Illustrations, or more 
extended remarks upon the principles, have been shown, so far as 
practicable, in fine print. 

For teaching purposes extensive lists of quiz-questions mid 
problems (about 600 in number), have been introduced. As these 
questions are addressed to the salient features of the subjects, 
their use has been reported as a great help in preparing the lesson, 
both in time saving and securing concreteness. By using these 
lists the author has been able to get highly satisfactory recitations 
from a class of twenty in about thirty minutes time. Each student 
answered two questions on the blackboard. Then the teacher 

vi 



PREFACE 

corrected and discussed these answers with the class sitting as a 
*' committee of the whole." This plan always held the interest 
of the students and provoked much valuable discussion of the 
principles involved. 

While no two engineering schools present identical oppor- 
tunities, yet the book is adaptable to various situations. For 
example, in the author's experience, with thirty-two one-hour 
recitations, each presupposing two hours of preparation, there 
was no difficulty in covering practically the entire book. For 
schools giving but one term, with one hour per week, or about 
sixteen recitations, Chapters VI and VIII, on Contracts of Asso- 
ciation and Negotiable Paper, respectively, would almost certainly 
have to be omitted. This would lessen the bulk of the book about 
twenty-five per cent. Other parts could be shortened by assigning 
definite questions and problems instead of a fixed amount of text. 
But if three periods per week are afforded for sixteen weeks the 
entire book should be covered with considerable thoroughness. 
Current specifications and contracts might then be studied and 
time should be taken for practice in trying to better their parts by 
rewriting them. There might also be time for partially solving 
practical problems by trying to write a specification to cover a 
given set of facts, — the laboratory method of studying contracts, 
as some one has called it. This would be a most valuable field for 
co-operation with the Engfish Department of the School, for the 
problems of law, of engineering, and of rhetoric are here inextric- 
ably interwoven. 

Acknowledgments. — In studying the technical field of engi- 
neering contracts and specifications, one must give due recognition 
to the pioneer labors of the late Professor J. B. Johnson, as well 
as to those of his learned successor, Mr. John C. Wait. From the 
Httle volume prepared by Dr. J. A. L. Waddell in collaboration 
with Mr. Wait, the author has gleaned valuable and suggestive 
matter. In preparing the present work, the author is greatly 
indebted for many valuable suggestions to the Hon. Charles Neal 
Barney, of Lynn, Mass., and to Professor Samuel C. Earle, of the 
Department of EngHsh in the Engineering School at Tufts College. 

Conclusion. — The author hopes his statements of law may 
not appear dogmatic. He has studied and quoted recognized 
authorities, though doubtless he has sometimes sHghtly but un- 
wittingly misinterpreted them. He warns the student that 

vii 



PREFACE 

he may elsewhere find statements apparently in flat contradic- 
tion to those made here. Perhaps a more thorough study 
of the situation will effect a reconcihation ; he should also re- 
member that the courts in different States often hold opposite 
views on a given point, and that in law as well as in medicine, the 
doctors sometimes disagree. The traditional question as to the 
patient's fate will not always be answered. It may also be that 
the author's reasoning from the estabhshed principles to their 
application under modern conditions of engineering practice may 
sometimes have gone awry. If under the test of practice the 
engineer or contractor finds the arguments will not stand the 
strain, the author acknowledges in advance his indebtedness to any 
such persons who discover and will inform him of the discrepancies. 

J. I. T. 

Tufts College, Mass., July, 1910. 



vui 



TABLE OF CONTENTS 

CHAPTER I. INTRODUCTION. — Importance of business study to en- 
gineers — Managerial positions require business as well as technical 
knowledge — Commercial engineering more remunerative than strictly 
scientific work — The making of contracts, reports on properties, ap- 
praisals, etc., etc., now require engineer to have a wide business knowl- 
edge — Business training develops broad-gage engineers — Engineering 
schools owe a duty to teach business principles — Engineering-Busi- 
ness fields — Fundamental position of contracts in business and engineer- 
ing — Aim of present book. (p. 1.) 

CHAPTER II. CONTRACT ESSENTIALS. Practicable and equitable 
contracts — Why unjust contracts exist — Necessity for recognizing 
common law essentials in all contracts — Legal rules and technical terms 

— Competent parties — Lawful subject matter — Contracts in violation of 
statutes — Contracts opposed to the common law — Surety bonds — 
Contracts opposed to public policy — Consideration — Mutual and gratui- 
tous promises — Agreement, or mutual assent — Mistake — Misrep- 
resentation — Fraud — Duress — About eighty questions for study, 
(p. 9.) 

CHAPTER III. DEVELOPMENT OF CONTRACT PRINCIPLES. — Ex- 
press contracts — Offer and acceptance — Public offers — Revocation — 
Implied contracts — Illegal contracts cannot be implied — Conditional 
contracts — Conditions precedent, subsequent, and concurrent — Lan- 
guage in creating conditions — Construing, or interpreting contracts 

— Rules of construction — Relative importance of the parts — Argument 
for clear and forceful writing — Custom and Usage, and when it may be 
claimed — Conflict of laws — Lex loci contractus, etc. — Statutory 
regulations encountered — DISCHARGE of contracts — Performance — 
Specific performance — Origin of equity, and scope of its doctrines — 
Tender of performance — Substantial performance — Severable contracts 

— Summary of performance — Discharge by agreement — Modification 
and alteration — Discharge by waiver — Accord and satisfaction — Al- 
terations — Consideration — Discharge by alterations — Supplemental 
contracts — Extras — Importance of the topic — Engineer should not 
have too arbitrary power to decide upon extras — Argument for definite- 
ness in specifications — How extras arise — Practical suggestions on 
Extras and Payments — Modes of fixing price — Discharge by payment 

— Breach in general — Contractor suspending work — Remedies for 
breach — Exoneration — Quantum meruit — Quasi-contracts — Dam- 
ages — Liquidated, and unliquidated damages and penalties — Indirect 
damages — About eighty questions for study and review, (p. 37.) 

CHAPTER IV. AGENCY, TORT, and INDEPENDENT CONTRACTOR. 

— Definition and parties to agency — Rests upon contract — Creation of 
agency — Scope of authority — Delegated powers — Agency by implica- 
tion — Ratification — Essentials — Undisclosed principal — Benefits — 
Assignment of contracts — Summary of agent's authority — Duties of 
agent — Instructions — Liability to third persons — Engineer as agent — 
TORTS — Relation of common and statute law — Precedence of statutes 

— Contract and tort distinguished — Definition of tort — Proximate 
cause — Personal responsibility — Justification in tort — Discharge of 
tort — Trespass — Nuisance — Negligence — Engineer's duty as to neg- 
ligence — Sources of liability in tort — Electrolysis — Explosives — Re- 
lation of Torts to Agency — Test questions for responsibility — Contract 

ix 



TABLE OF CONTENTS 

principles involving Torts and Agency — INDEPExNDENT CONTRAC- 
TOR — Central position of the doctrine — Distinguished from "master 
and servant" — To create the status is aim of all engineering contracts — 
Difficulties in contract-writing — Types of engineering contracts — Ex- 
ceptions to rule of liability of independent contractor — Wait, on indem- 
nity and insurance clauses — Relation to contract writing — About 
seventy questions for study — Seventy-five questions and problems for 
general review of Chs. II, HI, and IV. (p. 75.) 

CHAPTER V. REAL PROPERTY.— Land defined — Materials of con- 
struction — Trade fixtures — Water — Ownership in subterranean waters 

— Ownership in surface waters — Surface drainage into water courses — 
Rights of municipalities — Water courses — Sewage disposal into streams 

— Mill privileges — ESTATES in land — Fee simple — Lesser estates — 
Easements — Dominant and servient estates — Party walls — Highway 
easements — Creation and extinction of easements — Modes of acquiring 
title in land — Estates by prescription and adverse possession — Re- 
lation to work of surveyors — Prescriptive easements — Lateral support 

— Duty of contractor regarding it — Vertical support — DEEDS — Es- 
sentials — Parts of a deed — Warranty and quit claim deeds — Examina- 
tion of titles — Deed des:>i-iptions — Rules of construction — Monu- 
ments — What quantit}^ passes — Grant includes what — Trees — 
Duties of surveyor — Highway boundaries — Water boundaries — Title 
by accretion — Dedication — Eminent domain — Condemnation pro- 
ceedings — By whom exercised — About seventy-five questions and 
problems on law of Real Property, (p. 102.) 

CHAPTER VI. CONTRACTS OF ASSOCIATION — CORPORATIONS 

— Definition and types — Corporations and partnerships compared — 
Other forms of association — Essentials to existence of corporation — 
Theory of corporate powers — Promotion — Subscription — Incorpora- 
tion — Advantages in corporate form — Construing charter — Implied 
powers — Common law powers — Ultra vires, ancient and modern 
views — Status of ultra vires contract — Transaction of business — 
Liability in tort — Dissolution — The stockholder — Contract of mem- 
bership — Kinds of stock — Stock-watering — Incidents of stock-owner- 
ship — Liabihty of stockholders — Of directors — Transferability of 
stock — Stockholding in other companies — Municipal corporations — 
Charter powers — Liability for acts of its servants — Debt limits — 
Liabilitv of Municipalitv in tort — Duty with reference to streets and 
sewers — PARTNERSHIP — Defined — Articles — Partnership by im- 
plication — "Holding out" — Test for partnership existence — To be 
distinguished from Agency and Joint-enterprises — Firm name — Notice 

— Dissolution — Wind-up — Final accounting — Kinds of partners — 
Partner's powers — Implication of agency — Partner's liability — Termi- 
nation of it — Partner's interest in the firm — Partner's lien — Recom- 
pense — Duties — Limited, or Special partnerships — Their usefulness — 
How created — Risk of special partner — Name — Joint-Stock Com- 
panies — Status explained — Powers and liabilities of members — May 
be incorporated — Dissolution — About sLxty questions, (d. 13S.) 

CHAPTER VII. CONTRACTS OF SALE AND TRANSPORTATION. — 
SALES — Definition — General characteristics — Sales by non-owners — 
Goods not in existence — Statute of Frauds — Application of Statute — 
Satisfying the Statute — Delivery and acceptance — Constructive de- 
livery — Binding the bargain — Memorandum — Effect of non-com- 
pliance — When does title pass? — Something remaining to be done — 
Conditional sales — Sales on approval — Unappropriated goods — Jus 
dispoiiendi — Stoppage in transitu — Duration of right of stoppage — 
Effect — Seller's hen — Other remedies of unpaid seller — Remedies of 
buyer — Time of deli^'ery — Illegality and fraud — Remedies of de- 



TABLE OF CONTENTS 

frauded party — Sales to defraud creditors — Caveat emptor — Tech- 
nical elements of fraud — Falsehoods, or reckless statements — Repre- 
sentation and warranty — Fraud on vendor — Delivery — Warranty — 
Express and implied warranties — Sales by sample — Delivery — Right 
to examine goods — Payment — Cash and credit sales — CARRIERS — 
Common carriers and their privileges — Facilities — Discrimination — 
Liability, and "excepted" risks — Fault of shipper — Delivery by car- 
rier — Excuses — Bill of lading — Connecting carriers — Carrier's lien — 
Conclusion — About one hundred test questions, (p. 175.) 

CHAPTER VIII. NEGOTIABLE PAPER. — Defined — Essentials to ne- 
gotiability — Unconditional written promise — To pay definitely — To 
specified person — Delivery — Who can make negotiable paper? — 
Competency to contract — Corporations, fiduciaries, etc. — Signing — 
Trade names — Partner — Joint-signing — Fraudulently — Negligence 
of signer — Holder in due course — Intent to pass title by delivery — 
Escrow — Maker's liabilities — How it may be discharged — Dishonor 
— Accommodation paper — Consideration — Indorsement — Effect — 
Kinds of indorsement — Indorser's warranties — For whose benefit — 
Modes of discharging indorser — Presentment — Checks — Certified 
checks — Duty of bank — Protest — Bonds — Judgment notes — Other 
paper — About fifty study questions, (p. 205.) 

CHAPTER IX. PREPARING and WRITING ENGINEERING CON- 
TRACTS. — Introduction — Relation of commercial to engineering con- 
tracts — Engineer and lawyer may co-operate — Language to be used — 
Task of the Court — Length — Repetition of exact phrases — Purpose in 
specification writing (is an art) — Engineer's preparation — Waddell , on 
mistakes — Engineering contract- writer must be well grounded on busi- 
ness principles — Engineer's duty to prevent lawsuits — True economy 
in good specifications — Covenants, or General Clauses — Matters treated 
in them — Practical conclusions — Elaborate contracts and specifications 
must be systematically planned — Incorporation by reference — Identi- 
fication of document incorporated — Physical incorporation — Oral 
proof, etc. — Practical suggestions for General Conditions clauses — Work 
of Committee of Amer. Railway Eng. & M. W. Assn, February, 1909, 
analyzed and discussed, covering such topics as Scope of Contract, Its 
Duration, Measurement of Quantities, Workmanship and Materials, 
Changes and Alterations, Extras, Contractor's Risks and Obligations, 
Payments, Disputes and Arbitration, Powers of the Engineer, etc., etc. — 
Status of movement for uniform General Contract forms — General Con- 
ditions in a Building Agreement — Suggestions as to Checking Docu- 
ments, Definitions, Drawings, Lines and Levels, Materials and Work- 
manship, etc., etc. — SPECIFICATIONS — Are a part of the contract — 
True economy in good ones — Reasons for imperfect specifications — 
What they should contain — Impracticable requirements — Illustra- 
tions — Why interpretation is needed — Practical hints — Movement 
toward standard clauses discussed — Subdivisions in specifications — 
Mode of studying specifications — Note-book analysis only practicable 
method — Conclusions — Summary of the situation — Skeletons of im- 
portant examples of Contracts and Specifications, such as Charles River 
Dam (Boston), Grand Central Terminal Improvement (New York), are 
given. 

APPENDIX NOTES. — 1. Legal Aspects of Modern Technical Problems— 
2. Public Policy and Arbitration Clauses — 3. Public Policy, Railroad 
Passes, etc. — 4. Implied Contract with a Condition Precedent, and illus- 
tration of Implied Condition Precedent — 5. Time element as a Condition 

Precedent — 6. Statutory Regulations encountered in Performance 

7. Breach by Abandonment — 8. Indirect Damages — 9. Liquidated 
Damages — 10. Electrolysis — 11. Appropriation of Municipal Water- 

xi 



TABLE OF CONTENTS 



..•^^a'Ti • ^^^t^^'al Support, and Negligence— 13. Construing Partner- 
ship Articles- 14. F.nal Accounting in Partnership- 15. Surltyship^ 
16. 1 vpes of Engineering Contracts (Frank B. Gilbreth) — 17 Objects of 
Specifications- 18.^ True Economy in Good Specifications- 19 Polit- 
ical Contracts and Trouble Breeders— 20. Short Bibliography of Iml 
portant bpecihcations — 21. Intention of Parties as to Passin- Tit e 



xu 



CONTRACTS 

Chapter I 
INTRODUCTION 

This chapter seeks to show the importance of a thorough knowledge of con- 
tracts to those engaged in business and engineering practice. Managerial 
positions of importance should be properly held by the engineer who has 
designed the works, keeping clearly in mind the financial sides of con- 
struction, operation, and maintenance, as well as by some other person 
who has had "business" or legal training only. The reasons why the 
engineer does not more often occupy such positions are points herein 
dealt with. That there are now many fields calling for engineering- 
business knowledge, that all business is at bottom principally a matter of 
contracts, and that there are certain prominent landmarks by which the 
engineer may more easily find his way through the mazes of current 
business practice, — these are points herein emphasized. Thereafter we 
shall proceed to a systematic study of contracts, touching in turn upon 
the contracts which deal with purely commercial matters, with the con- 
struction of engineering works, contracts of association between individ- 
uals, and those conveying ownership in property, etc, etc. 

1. Importance of Business Study to Engineers. — A 

recent analysis of the professional work of some 2400 members 
of the American Society of Civil Engineers, made by its President, 
showed that nearly 40% were engaged either in manufacturing 
or contracting, or were consulting engineers. These are fields in 
which the business element is of prime importance. The basis 
for this investigation was a representative body of the country's 
most successful civil engineers. Results equally significant 
would probably be obtained in an investigation of the mechani- 
cal and electrical engineering professions. Is stronger evidence 
necessary to show the desirabihty and need of giving instruction 
in some of the more common business principles in the technical 
schools which furnish the fundamental training for the practice 
of engineering? 

2. " The civil engineer's frequent isolation on construction 
work, coupled with frequent changes geographically, have been 
important factors in preventing him from becoming thoroughly 
amalgamated with society. The result is that he is frequently 
the tool of those whose aim it is to control men and to profit by 
their knowledge, and thus he is a servant where he should be a 
master. Herein is our weak point, due, perhaps, to professional 

1 



§ 3 CONTRACTS 

narrowness. The engineer should assume the initiative where he 
has often been the follower. He should be a manager and give 
orders to others who can as well do the work under his direction 
as could he, were the positions reversed. It should not be con- 
sidered unprofessional for an engineer to be a capitalist, and 
when he takes his proper place as promoter and organizer, and 
shares in the profits of engineering enterprises, he will no longer 
be taunted with the saying, that, 'An engineer is only good to 
spend other people's money.' 

" He has not reached his proper rank until he can hold the 
position of manager, as well as that of designer and supervisor 
of engineering works. A better position will be secured whenever 
an engineer makes it his business to study men as well as materials, 
and to use men as he does machinery. But the advancement must 
be individual, by fitting one's self for managerial duties and 
'making good' in their performance.'! (Extracts from Presidential 
Address of Onward Bates, Am. Soc. C. E., 1909.) 

3. The rapid expansion of industrialism is making its demand 
for technically trained men more and more felt, and engineers are 
being chosen for administrative offices in large corporations, and as 
the directing forces of great enterprises. This tendency must of 
necessity increase, for in the evolution of corporate life there are 
frequent changes, and transfers and promotions occur ever}^ few 
months. The employee familiar with the aspects of corporate 
activity must thereby be benefited. As superintendents and 
managers of the old school retire, we may confidently expect to 
see them frequently succeeded by technically trained men who 
have been found to possess executive ability of high order. Places 
of the highest responsibility are thus coming to be recognized as 
properly open to engineers, even when no personal engineering 
duties are required in them. 

4. The study of cost data is coming to be more and more 
required of the engineer and a store of technical knowledge is by 
no means all that is needed to make him fully successful in his 
profession. In order to convince capitalists and official boards 
of the importance of his recommendations, it is plain that he must 
talk to such persons in terms that they can readily understand. 
He must use their language, and that is the language of business. 
Engineers who have employed their business instincts to advan- 
tage in the offices of engineering concerns have been able to rise 

2 



INTRODUCTION^ § 6 

to higher positions and to command larger salaries than those 
who have chosen to confine themselves to more purely professional 
activities. The aspect of all enterprise is commercial, and gradu- 
ates of technical schools never reach their maximum of success 
until they devote their ripened energies to business fields. Further- 
more, there are greater opportunities in the business than in the 
professional departments of engineering. 

No remark is more frequently heard among business men than 
that the engineer does not understand business. This is too 
frequently true. Nevertheless the engineer is trained in logical 
deduction and reasoning, is thoroughly grounded in rigid scien- 
tific principles, and taught to think consecutively. He should, 
therefore, obtain results commensurate with those of the business 
man if he applies his logically trained mind to business and 
economic problems with the same diligence that he exercises in his 
purely engineering functions. For even the so-called " business 
man " frequently has had no systematic instruction in business, 
but has absorbed his knowledge from the business atmosphere in 
which he moves. He usually does not know the laws of business 
but only its usages and customs. 

5. Duties of Engineer. — As the engineer develops and gets 
away from purely technical routine work, he must draw up speci- 
fications, make contracts, hire and direct labor, and report on 
properties. These are within his legitimate field as at present 
understood, and demand that he should have a knowledge of the 
general business methods of the community in which he lives, and 
that he should be able to present his reports in such a way as to be 
readily understood by business men. He should know something 
of the elements of contract law, of stocks, bonds, notes, sales, 
and the law of property in general, of agency, tort (that he may 
appreciate the general theories upon which the law redresses 
wrongs), the formation of partnerships, and of corporations, and 
the general laws relating thereto, and of the powers and functions 
of the various corporation officials. These are matters of which 
the general principles can readily be acquired by an engineer 
trained to study. 

6. Argument for Study of Business. — The engineer's scien- 
tific training teaches him to deal with the laws of Nature; he 
should have business training to teach him how to deal with men 
and money and the laws relating thereto. There are certain laws 

3 



§ 7 CONTRACTS 

and general principles which, if mastered by the student during 
his college course, would give him a different attitude toward his 
profession and broaden his horizon. Why then restrict an 
engineer's education to purely scientific subjects? Why not 
expand his horizon to enable him to take the position in the 
community which his technical training prepares him to occupy? 
It is not expected, nor is it desirable, that the engineer should, by 
thus expanding his functions, eliminate the lawyer or the financier. 
But an elementary knowledge of the legal rights, duties, and re- 
sponsibilities of the business man should, on the other hand, 
indicate more clearly the necessity for the lawyer and the financier, 
and above all make it plain when and where their services are 
needed. In short, a business training should develop in the 
engineer a new view of his relations to other professional men 
and place him in a position to engage their services rather than 
to act as their agent. 

7. Duty of Engineering Schools. — In justice to the profession, 
schools of engineering must keep pace with this commercial ten- 
dency. That they are striving to do so is shown by the fact that 
a number of colleges have added to their purely technical courses 
studies relating to the business and economic aspects of engineer- 
ing. The point has been well taken that a technical school 
which does not tell its undergraduates how to do business safely 
with business men does not fulfill its obligation to them. It may 
be argued that the curricula of our engineering schools are already 
overcrowded, and their students overburdened. To this it may 
be answered that perhaps certain purely scientific studies might 
well be dropped in favor of more practical ones of this character. 
It is thought, however, that this may not be necessary, as a 
fairly extensive course on the principles of business law can be 
given without overburdening the student. In general, it may be 
urged that the college is par excellence the place for the incul- 
cation of principles. If this is true of science, why not of the 
business side of engineering? 

With reference to the student at the end of his college course, 
a leading editorial writer expresses himself thus: *' With the 
increasing requirements placed upon the engineer, it is seldom 
that purely technical duties fall to the lot of the recent graduate 
in engineering. Certain large manufacturing plants do employ 
pure specialists, but in the engineering world at large, business 

4 



INTRODUCTION § 9 

training is quite as important as the ability to solve differential 
equations. The financial aspects of engineering were never more 
pronounced than to-day." 

8. Engineering-Business Fields. — A field obviously suitable 
for a business man with a technical training, namely, an engineer 
with some knowledge of business principles, is that of purchasing 
agent for a corporation, whether it be a railroad, water-works, 
electric lighting and power plant, or any of the great manufactur- 
ing industries. The importance of scientific knowledge in such 
positions has not been duly recognized. Apparently the directors 
of many corporations have not been aware that other qualifi- 
cations than those of the ordinary business man are necessary to 
secure the highest economy in the purchase of materials, supplies, 
and machinery. In many cases such purchase has consisted 
merely of accepting the lowest bid offered. And yet in these 
days when the press is filled with discussions of how to eliminate 
wastes, obtain greater economy, and stop leaks generally, the 
fallacy of such a course is at once apparent. No one who has 
had extensive opportunity to observe the methods followed by 
numerous corporations in buying supplies and equipment can 
doubt that great improvement is possible in the conduct of their 
purchasing departments. The choice of supplies and new equip- 
ment is a matter to be settled upon a scientific basis only, if the 
greatest economy is to be obtained. But it is also apparent that 
to make these departments most efficient their technically trained 
heads must not possess less of business knowledge than the non- 
technical persons whom they supersede. 

9. In a collateral field, an engineer should apparently be well 
qualified to sell an engineering product, since he best knows 
wherein it excels and his statement of its purposes and capacity 
can be relied upon by men who are themselves expert engineers, 
and who need expert argument. In the employ of the largest 
manufacturing interests there are many engineering salesmen, 
agents, domestic and foreign department managers, engineering 
attorneys, and even corporation presidents; the duties of all of 
these persons are chiefly commercial yet thoroughly interwoven 
with the technical elements of the business. Such men must, 
therefore, have business equipment and training, executive 
personality, and the administrative faculty, in addition to their 
engineering knowledge. 

5 



§ 10 CONTRACTS 

10. Again, growing fields in engineering are those of expert 
business systematizers, organizers, cost accountants, appraisers, 
etc. Contracting firms and engineering offices engaged in hand- 
ling private, railroad, government and municipal contracts, and 
in consulting work have too often failed because the commercial 
side of their practice — the really vital side — was not sufficiently 
developed to meet the demands upon it. Men were needed who 
were distinctly fitted to care for the commercial departments and 
to be, at the same time, familiar with the technical, or engineering 
routine — in a word, " Commercial Engineers." 

11. Contracts Underlie Engineering Business. — Leading edi- 
torial writers for the engineering press have pointed out that 
with the growth and development of communities the need of 
structures of diverse and complicated character arises. These 
structures are for the most part erected by contract work. The 
old theory was that the plans and specifications of the chief 
engineer would indicate with sufficient fulness and clearness all 
requirements, but it has become evident that the contractor as 
well as the engineer must have a technical training. It is evident 
too that the contractor must not only appreciate the technicalities 
of plans, materials, and processes of construction, but also the 
legal phases of his status, lest through some inadvertence he 
suffer unreasonable hardship. 

It has therefore come about that the excellence in the. quality 
of materials used together with the requirement of a high degree of 
skill in carrying out modern engineering works of magnitude have 
tended to cause the engineer to become a contractor. In like 
manner the contractor has found it necessary to become a skilled 
engineer. This is as it should be, since technical knowledge and 
professional skill have become essential not only for the design 
of work and the elaboration of proper specifications and contracts, 
but also for the production of materials and the proper handling 
of them in construction. Probably no better engineering talent 
or experience is to be found in the country than that engaged by, 
or connected with, great contracting firms. This statement 
assumes added significance when we consider that great plants 
like those bearing the names Westinghouse, Edison, and Geneial 
Electric are contracting establishments. 

12. Present Purpose. — The foregoing discussion of the en- 

6 



INTRODUCTION § 1 5 

gineer's relation to commercial enterprises is largely a summary 
of editorial opinions expressed in the leading engineering journals, 
and of articles contributed by consulting engineers and specialists. 
In view of such a consensus of opinion regarding the need of 
business training for engineers such a textbook as the present 
one appears amply justified. An endeavor has been made in the 
present work to supply a practical course showing the contractual 
basis of engineering work and of business at large. The object 
has been to provide a textbook suitable in form and subject 
matter for use in engineering schools. As each rule of law is 
studied, it is sought by frequent repetition and allusion to drive 
home the meaning of certain legal theories which lie at the root 
of our commercial usages and customs, introducing so far as 
necessary the elementary conceptions from the leading fields of 
the common law. 

13. The development of contract law by no means stops with 
a consideration of a few of the countless situations arising under 
construction contracts, but as business is at bottom almost solely 
a matter of contract, attention is also directed to contracts of 
sale, of partnership, agency, contracts of carriage, contracts in 
negotiable paper, etc. It is believed also, that even a hasty study 
of the incidents and properties of everyday contracts of business 
will greatly assist the student in understanding and appreciating 
the peculiarities of engineering contracts. With the latter the 
engineer will almost certainly have occasion to deal, either in 
their preparation, or interpretation. 

14. In preparing these outlines of contract law, a two-fold 
purpose has been kept in view: First, to make matter and state- 
ment such as would be readily intelligible to the average college 
student who has no opportunity for extended study of legal 
principles; second, to present such facts and rules as seem likely 
to be of most value to him in his future professional and business 
career. To properly treat of the engineer's duties it is necessary 
to deal somewhat with the principles of agency, tort, and of real 
property, since these bear an intimate relation to his work, wholly 
aside from his rights and obligations arising under contracts 
generally. 

15. Statements herein made are usually in general terms, 
since the opportunity is lacking to illustrate them by most of their 
particular applications, and much collateral matter which would 

7 



§ 15 CONTRACTS 

serve to elucidate and amplify the rules stated has of necessity been 
omitted. The aim throughout has been to quote the best authori- 
ties upon the several subjects, and to omit the statement of rules 
which are equivocal in their application. It is hoped that the 
result of this effort will be to produce a condensed statement of 
certain important rules governing the transaction of all business, 
and that the engineer may safely attempt to apply them to 
situations encountered in his own experience. It is further 
hoped that this material will serve as the nucleus of a fund of 
information which each student may readily enlarge as his tastes 
and business interests dictate. 

In conclusion, to say that '' Ignorance of the law excuses no 
one," is to use a phrase worn to triteness, though probably few 
laymen recognize the sound philosophy underlying it. Persons 
of technical training in the natural sciences rarely appreciate the 
existence of a rigid framework of legal principles upon and around 
which all the affairs of our complex civilization are built. To 
destroy or to undermine this framework would plunge society 
into anarchy. Said in another way, there is a right and legal way 
of carrying on the affairs of the business world — to contravene 
it is to invite disaster. 



8 



Chapter II 
CONTRACT ESSENTIALS 

Engineering contracts must be practicable; they should also be equitable. 
Ignorance of the legal status of the individuals concerned, i.e., lack of 
knowledge of what the law will assist them to secure, and of those matters 
wherein it will refuse its aid, is probably a most potent cause for imprac- 
ticable contracts. If the engineer is to recognize the legal elements in 
the situations which arise, he must study systematically the leading ele- 
ments of the law of contracts. Persons having power to enter into bind- 
ing contracts, persons not having such power, the varieties of subject 
matter about which lawful contracts ma}^ be made, unlawful contracts and 
their consequences, the ideals of the common law regarding contracts, and 
reasons why contracts opposed to them are illegal, methods of enforcing 
lawful contracts, kinds of "consideration," and what is meant by "meet- 
ing of the minds"; — these topics are extensively developed in this 
chapter, 

16. PRACTICABLE and EQUITABLE CONTRACTS. — "Many con- 
tracts appear to be drawn solely on the assumption that the owner's interests 
must be most carefully guarded against the contractor's failure to fulfill his 
agreements properly. Under agreements of this type, the contractor generally 
takes chances that the overreaching clauses will not be strictly enforced, and 
that profits lost on unfair clauses can be made up on 'extras,' But if there 
is close competition with only a small margin of profit at best, the contractor 
becomes more troublesome over small omissions or errors, and naturally resists 
as far as possible the exactions he is subjected to when the literal fulfillment of 
ambiguous conditions, and 'taking the pound of flesh' is insisted upon, 

"A just contract is equally A^aluable to the owner, the contractor, and to 
the engineer, ' If it is accurate and free from ambiguity, it cheapens the cost of 
work by eliminating the necessity for bidding sums to cover every possible 
contingency and uncertaint}^ It broadens real competition, and encourages 
lower estimates. It insures more rapid erection, and acts as a powerful regu- 
lator of the mutual understanding and confidence in the fairness of all the 
parties, — and fairness, like oil to machinery, is necessary to prevent friction " 
(Bamford, Proc, Am, Soc. C. E. XXXV, p, 1319.) 

It is evident that the contract-writing engineer must under- 
stand the technical and legal requirements of his subject, or his 
work will be impracticable. It is believed, moreover, that many 
inequitable and unjust provisions now current in engineering 
contracts exist because of an over-zeal on the part of contract- 
writers to protect the interests of their clients, and because the 
just objections of the contractor to unfair requirements have not 
been presented in a candid and impersonal fashion. Contract- 
writers have been bigoted because ignorant, and unjust through 
lack of information. To give due consideration to the rights of 
all the parties to the various types of contracts is the present 
aim. This requires that the strictly legal aspects of the various 

9 



§17 CONTRACTS 

topics must first be considered, after which some of their ap- 
plications to engineering practice may be briefly stated. We are 
brought then at the outset face to face with the question " What 
is a contract?" 

17. CONTRACT DEFINED. —A contract is an agreement 

between competent parties, 
enforceable at law, whereby each acquires a right to what is 
promised by the other. Two persons can promise each other 
whatever fancy dictates, but unless such promises are enforceable 
at law, they form no contract ; and unless those learned in the law 
can distinguish certain technical elements in the promises, the 
law will not compel either party to carry out the terms of his 
promise. 

18. CONTRACT ESSENTIALS. — If all persons were 

honorable, having made 
promises they would keep them. But as many are strongly dis- 
inclined to live up to their agreements, society has provided legal 
means for compelling them to do so. In the interests of justice, 
however, it becomes necessary to carefully weigh the circum- 
stances under which the agreement was entered into to ascertain 
whether the parties intended it to be of the legal and binding 
sort; and when such intention is found, to determine whether 
the contract is of such a nature that it ought in reason and justice 
to be enforced. Thus in the formation of a contract it is univer- 
sally recognized as essential that there be: 

1. Competent Parties. 

2. A Lawful Subject Matter. 

3. A Proper Consideration. 

4. A Genuine Agreement, or Mutual Assent. 

These elements will be developed at some length and the 
student is urged to master their significance at the outset in order 
that he may follow more intelligently the discussion of numerous 
practical cases that will be given. After learning something of 
the doctrines and terminology of contracts in general some 
characteristic details of engineering contracts may then profitably 
be discussed. 

19. It should always be borne in mind, however, that in the 
eye of the law engineering contracts are no different from any 
other business agreements. By the term '* engineering contracts " 

10 



CONTRACT ESSENTIALS §21 

we are here referring to contracts which directly concern engineer- 
ing projects, and with which every engineer sooner or later comes 
in contact. 

If the student or engineer thoroughly comprehends a few 
basic principles common to all contracts, he possesses a point of 
vantage from which to view the numerous detailed and highly 
elaborated provisions of important engineering contracts. Knowl- 
edge of this character will help him to discern their relative 
importance, and to give them a sounder and wiser interpretation. 
We must creep before we run, and numerous cases from other 
fields are therefore dwelt upon; from these the habit of deductive 
reasoning may be applied by the student to point the solution of 
many engineering problems arising under analogous conditions. 

20. BASIC POSITION OF CONTRACTS. — Contracts are 
as old as civilization. They form one of the greatest foundation 
stones upon which society is erected. It is natural, therefore, 
to find contracts permeating every phase of our modern society. 
There are many different types, each peculiarly adapted to the 
situation in which we find it. Thus there are contracts of sale, 
of marriage, contracts by which one undertakes to build or make 
something, to render services, to transport persons or goods, 
contracts of partnership, etc. Under and through them, how- 
ever, we shall discern the threads of these legal " elements,'' the 
indispensable groundwork of them all. 

21. LEGAL RULES. — The common law* abounds in 
instances where a general statement is made expressing the broad 
and basic principle, and then the primary rule is immediately 
qualified, lessened, and pared down, with a view to applying the 
dogma to the case in point. To one trained in the natural and 
mathematical sciences, this appears unscientific and haphazard, 
since the laws of nature are unchangeable. The engineering 
student must accommodate himself, however, to this method 
and learn to give the same careful thought to the qualifications of 
a rule as to the primary rule itself. 

* " Common Law." 

The great Chief Justice Shaw of Massachusetts, in 1854, thus defined the 
meaning of these words: "It is one of the great merits and advantages of the 
common law that instead of a great mass of practical detailed rules established 
by positive provisions and adapted to the precise circumstances of particular 
cases which would become obsolete and fail when the practice or course of 
business to which they apply should cease or change, the common law consists 
of a few broad and comprehensive principles, founded on reason, natural 

11 



§22 CONTRACTS 

22. TECHNICAL TERMS IN LAW. — Every art and craft 
has its technical terminology and the universality of the custom 
is abundant proof of its usefulness. To the unreflective person 
it may appear that the principal object in the invention of this 
technology has been hopelessly to befog the subject for the 
unlearned. A closer analysis, however, shows that a single 
generally-accepted technical term conveys with precision the full 
import of an idea which a whole paragraph expressed in non- 
technical language could scarcely contain. It will be observed, 
also, that the more abstrase and subtle the shades of meaning 
exhibited by the subject matter, the more elaborate and complex 
is its technical terminology. In the study of the law many 
striking examples of this are found, and these remarks are merely 
intended to put the student early upon his guard, lest he needlessly 

stumble. 

When a technical term is freshly-coined, or when the term 
differs plainly from any other word in the language, it is so recog- 
nized wherever met, and no great difficulty is encountered, save in 
the expenditure of mental effort in learning its meaning. But 
when, as in the case of legal phrases, old words, entirely unchanged, 
are used with a distinct technical meaning, the pitfalls of the 
student are many times multiplied. Because of this tendency 
of legal terminology to employ commonly-used words and phrases 
in a purely legal sense, this opportunity has been taken to em- 
phasize the importance of a familiarity with such terminology. 
In the discussions of principles that follow, technical terms have 
been freely employed and explained. It is believed that the 
value of this plan will be constantly apparent. Examples of the 
most confusing of such technical terms are: —consideration, 
fraud, misrepresentation, negligence, prescription, conversion, 
deed, mistake, etc. 

23. (1) COMPETENT PARTIES. — In general it may be 
said that any one can make a binding contract. The immediate 

justice, and enlightened public policy, modified and adapted to the circum- 
stances of all the particular cases which fall within it. 

"These general principles of equity and policy are rendered precise, 
specific and adapted to the particular use by usage, which is of itself proof of 
their general fitness and practical convenience, but still more by judicial 
exposition; so that when in the course of judicial proceedings by tribunals 
of the highest authority, the general rule has been limited, modified, and 
applied according to the particular cases, such judicial exposition when well 
settled, and acquiesced in, becomes itself a precedent and forms itself a rule 
of law for future cases under like circumstances." (See also Appendix Note 1 ) 

12 



CONTRACT ESSENTIALS §25 

exceptions to this general rule are that infants (persons under 

twenty-one years of age), married women, lunatics, and drunken 

persons cannot make binding contracts.* 

The contracts of infants are voidable, that is, they may be avoided or 
declared of no effect if the infant so desires; or he may choose to affirm the 
contract when he attains his majority. An infant may be charged, however, 
upon an implied (See §§ 68-70 ImpHed Contracts) contract for the value of 
necessities of life bought by him, and if he has obtained possession of goods 
through a voidable contract, he can not deny the legality of the contract on 
the grounds of his infancy, and still keep the goods. 

The disability of married women to enter into binding con- 
tracts has been removed in nearly every State by '' enabling 
statutes," so that now married women may contract with prac- 
tically the same freedom as men, except that in some States they 
cannot contract with their husbands. 

Contracts made with lunatics or drunken persons are held in 
some States to be binding if made in good faith, while in others 
they are regarded as absolutely void. If a man is so intoxicated 
or mentally incompetent that he does not know what he is doing, 
clearly there can be no real agreement. 

It should be observed thus early that the only persons upon 
whom the terms of a contract are binding are the parties actually 
entering into the agreement. Exceptions to this rule occur in a 
few peculiar contracts contained in deeds of land, when the con- 
tract is said to '' run with the land." In these exceptional cases 
persons other than the original parties to the contract are bound 
by it. 

24. (2) LAWFUL SUBJECT MATTER. — To ascertain if 
the subject matter of a proposed contract is legal (that is, whether 
the parties have a legal right to do the thing contemplated) fre- 
quently requires a considerable knowledge of legal relationships. 
Inasmuch as such knowledge is often needed by the engineer in 
determining the legality of proposed contracts, lawful subject 
matter will be treated at some length. 

The following are some of the more prominent grounds of 
illegality : 

(a) That the proposed contract violates some State or Federal 
statute ; 

(h) That it is contrary to the rules of common law ; or 

{c) That it is forbidden by pubUc policy. 

25. (a) Contracts in Violation of Statutes. — Crimes are for- 
♦Corporations have limited contractual powers, to be discussed in Ch. VI. 

13 



§25 CONTRACTS 

bidden by statute, and by the common law, also; a contract to 
commit a crime is illegal. A difficult phase of illegality is where 
statutes exist which bear directly upon the proposed contract, so 
that all the statutory provisions must be complied with. Con- 
tracts faihng to comply with such provisions are void. 

Legislative Restrictions of this character are imposed upon municipal cor- 
porations, counties, school districts, and educational and other Boards charged 
with public enterprises. 

The legislative enactment or constitutional provision which provides 
for such "legislative restrictions" generally expressly limits the extent of the 
powers of such corporate bodies, while frequently requiring the observance 
of specific formalities before valid and binding contracts can be entered into. 

Certain provisions which are common in such statutes and ordinances 
are: that the work shall be advertised and awarded to the lowest bidder; that 
the work must be authorized by the City Council after public notice and 
hearings; that a certain proportion of abutting property owners must combine 
to petition for an improvement ; etc. 

Any requirement that the Legislature may have incorporated into the 
authorizing statute, no matter how trifling and unimportant it may appear 
to the average business man, may, if difficulties arise, be regarded by the 
Court as an essential "condition precedent. " (See § 74.) 

To disregard such provisions is to invite serious trouble. 
After a large expenditure has been made by the contractor he 
may find that the whole contract is ultra rires (i.e., in excess of 
the real legal powers possessed by the party for whom the con- 
tractor is working). The rehef in such a case may be nothing 
short of a special Act of the Legislature, authorizing the contract 
as made. To obtain relief of this sort, however, is frequently 
next to impossible. 

A pitfall of this sort very easy to fall into is an instance where a municipal 
corporation has a statutory debt limit which can not lawfullv be exceeded. 
The contractor who, unwittingly, enters into a contract to do a paving job or 
other work of municipal improvement, may discover when the work is in large 
part done that the debt limit has been exceeded. While there may be com- 
plicated and extensive legal expedients which will in a measure rescue him fiom 
his predicament, it is evident that the contractor should inform himself as to 
all legislative restrictions before entering into such a contract. (See § 264.) 

The law unsympathizingly says that the two persons contract 
with each other " at their peril," or '' at arm's length." This 
means that each is bound to satisfy himself in advance as to the 
legal competency and responsibility of the other party, or else 
take the consequences of faihng to do so. 

"The [statutory] restrictions and conditions precedent prevailing in these 
various States and nations are so numerous, so exacting, so extraordinarv 
that no corporation or well-informed business man will undertake a project 
of any importance without the advice and counsel of a local attorney. To do 
so is suicidal to the best interests of the undertaking. " (Waddell & Wait, Spec 
& Cont. 165.) 

14 



CONTRACT ESSENTIALS §29 

As has been indicated above, the hst of restrictions is a long 
one with a probable tendency to lengthen. It is, in fact, so long 
that we have hardly done more than indicate the direction in which 
to look for them. 

26. Another restriction sometimes of vital importance is 
the so-called " Lien and Labor " laws. These laws are local 
statutes primarily designed for the protection of mechanics by 
giving them '' liens " (roughly defined as " first claims ") on the 
finished work for their compensation. These statutes may also 
contain other provisions as to the kind of labor which shall be 
employed upon public work, the hours of labor, and even the rate 
of wages. Evidently a failure to take account of such provisions 
may cause a contractor to submit a bid far too low, and therefore 
result in his ruin, or in the failure of the whole enterprise, 

27. Contracts in Restraint of Trade compose another class 
of illegal contracts. The most famous American statute upon 
this is the Sherman Anti-Trust Act. This applies, however, only 
to interstate commerce, and no comment need here be made upon 
it. Brief comment will be made upon other typical aspects of 
the same principle. 

Suppose two gas companies, owning equal and exclusive rights under a 
municipal franchise, combine and agree to apportion the city between them, 
for the purpose of avoiding competition and raising prices. Can they enforce 
such a contract in the courts? No, for this would plainly be in restraint of 
trade, tending to promote a monopoly, and hence contrary to public policy 
(121 111. 530). In cases of this class the kind of business involved will be 
especially considered by the court, and if the parties are public service cor- 
porations the rights of the public to the benefits of free competition will be 
strictly upheld. The same principle has been applied where railroad com- 
panies had agreed to go into partnership or to pool their earnings, these con- 
tracts being held invalid on the ground that thus the public was deprived of 
the benefits of competition. 

28. " Sunday Laws " to the effect that a contract entered 
into or to be performed on Sunday is void, will sometimes demand 
attention. No attempt will be made here to cover the extremely 
numerous and conflicting statutes and decisions made upon this 
matter in the various States, since in some of them the contract 
would be held good, but in others wholly bad. 

29. Statute of Frauds. — The most famous statutory regu- 
lation concerning the making of enforceable contracts is known 
as the " Statute of Frauds." This is a statute existing in prac- 
tically all of the States and is copied substantially from an Enghsh 

15 



§ 30 CONTRACTS 

statute of that name, enacted in 1677. It was intended to pre- 
vent frauds and perjury, and to lessen the risk of mistakes arising 
from the defective and imperfect recollection of witnesses, by 
requiring that certain contracts should be in un-iting, or else they 
should not be allowed to be proved in court. (9 Allen, ^lass. 8.) 

The Statute of Frauds has very numerous provisions. Those 
of pecuHar interest to the engineer require that contracts relating 
to the sale of, or pertaining to any interest in or concerning land 
shall be in writing. (See § 215 Deeds.) 

It is also provided that an agreement which by the intention 
of the parties is not to be performed within one year, or which is 
impossible of being performed within that time, cannot be enforced 
unless in writing. (96 U. S. 404.) 

Another important provision of the Statute is to the effect 

that contracts for the sale of '' goods, wares, and merchandise '* 

to the amount of $50, by the old statute, shall not be enforceable 

unless in writing. In some States this amount has been made 

$30, and again, by the recent Sales Acts adopted by several States, 

the amount has been increased to $500. There are important 

exceptions to the last provisions above which will be more fully 

analyzed in discussing the Statute under Sales, in Chapter VII. 

Of course a countless number of the minor contracts of everyday life are 
made and fully carried out without a scrap of writing. Many of these are 
"implied" contracts, no words passing between the parties at all; for example, 
buying a ride upon a street-car. In the absence of writing, if there is any 
verbal communication whatever, the contracts are known as "oral" agree- 
ments. In the preparation of engineering construction contracts in which we 
are primarily interested, it is not so much the requirements of the Statute of 
Frauds which puts the instrument into writing as it is common prudence, since 
the multiplicity of terms and details upon an extensive job could not be safel}^ 
entrusted to so precarious a thing as the human memory. 

30. (6) CONTRACTS OPPOSED TO COMMON LAW. — The 
tenets of the common law are so well defined, and if subject to 
change at all acquire new aspects by such imperceptible stages 
of growth, that common law requirements will cause less difficulty 
to the engineer than statutory prohibitions, for the vagaries of 
statute-makers are limitless, and no man can prophesy what may 
be enacted next. Every one is aware that contracts induced by, 
or based upon, fraud are illegal and unenforceable, though there 
may be no statutes to that effect in that particular jurisdiction. 
Other examples of agreements rendered illegal by the rules of the 
common law are contracts to defraud creditors ; the seUing of 
articles upon false representations, or under spurious trade- 

16 



CONTRACT ESSENTIALS §32 

marks or labels ; fictitious bidding at auctions ; and contracts 
resulting from collusion and fraud between bidders proposing to 
do work. 

3 1 . Contracts to Bind Third Parties. — Mr. J. B. Johnson points 
out in his Contracts and Specifications , that under the heading of 
contracts contrary to the common law the engineer will be espe- 
cially concerned with changes made in contracts by the principals 
(contractor and owner), without the consent of the sureties or 
bondsmen. It is a well-established practice in engineering con- 
tracts for the owner to require a surety bond from each bidder, 
that in the event of the contract being entered into with any 
particular bidder, the latter will fully and faithfully perform all 
its provisions. This custom arose because the engineering con- 
tractor was frequently- a person of limited means and financial 
responsibility, and the owner felt the need of outside assurance 
that the contractor would not quit the job midway, and thus 
cause the owner great annoyance, delay, and expense to secure 
its completion. 

A surety bond is a contract collateral to the construction con- 
tract, and the effect is, untechnically stated, that the bondsman 
wagers the amount of the bond that the contractor will perform 
with exactness and completeness all the provisions of the agree- 
ment. If the contractor fails to perform fully, the owner may 
look to the bondsman for indemnification.* 

32. Thus where a surety bond is given, a three-cornered situ- 
ation results : — first, there is a contract between the owner and 
the contractor concerning the work to be done ; second, a contract 
between the surety and the owner that the contractor will fully 
perform, etc. ; and third, an implied contract between the surety 
and the contractor that in the event of the surety's having to 
pay anything, he in turn shall be indemnified by the contractor. 
Hence as the terms of the construction contract constitute the 
essence of the second contract, and as, furthermore, the surety 
enters into the latter contract of his own volition and free consent, 
it would be entirely wrong and unjust to allow the owner and 
contractor to so modify these terms without the surety's consent 
as to place an entirely new obligation upon him. Such a modi- 
fication of the terms might result in great loss to the surety. The 
rule is simple enough, that while two persons may contract and 

* See Appendix Note. Suretyship. 

17 



§ 33 CONTRACTS 

bind themselves as they choose, they cannot by their acts bind a 
third or independent person against his will. (The law concerning 
a third party who is an agent will be discussed in Chapter IV under 
Agency.) 

This statement of the relations existing between the three 
parties will make the legal consequences of an alteration in the 
terms of the original contract clearer to the student. Further- 
more, he will more readily grasp the significance of a clause in a 
contract providing that alteration of subordinate clauses shall not 
invalidate the contract nor release the sureties. 

The possible results of an alteration of the terms of a contract 
containing no provision therefor may well be briefly summarized 
as follows: — a material change made in the original contract by 
the principals annuls both the contract and the bond ; if made 
without the surety's consent it may impose an obligation upon 
him which he is not willing to assume, and to do this is wrong and 
unlawful. This is because only the parties to contracts are 
bound by their terms. The original contract having been de- 
stroyed by the material alterations, and the attempted new con- 
tract of surety being illegal, the bondsman is released, and the 
owner is without the protection of the bond. 

It may be said in passing, that in the field of engineering con- 
tracting the place of the individual bondsman is being more and 
more taken by Bonding and Surety Companies, with results, in 
general, more satisfactory to all parties concerned. 

33. (c). CONTRACTS OPPOSED TO PUBLIC POLICY. — 
This subdivision presents no clear outline of demarcation from the 
preceding one, since the doctrines of public policy are somewhat 
elastic and may rarely appear in statutory law. For clearness, 
however, it is well to separate it. As a body, its outlines are not 
sharply defined, and its boundaries are being slowly extended. 
A learned English judge puts it thus : *' Public policy is a quantity 
that varies with habits, capacities, and opportunities of the 
public and the usages of trade." Another says, " Wherever any 
contract conflicts with the morals of the times, and contravenes 
any of the established interests of society, it is void as against 
public policy." 

There is an illustrative case in 139 Fed. Reporter, 7S0, where the U. S. 
War Dep't ordered a Steel Co. to remove a large quantity of slag it had pre- 
viously dumped into the Monongahela River, at Pittsburg. 

Two dredging contractors were asked to bid, and they did so. They 

IS 



CONTRACT ESSENTIALS §34 

acted in collusion, and tendered, respectively, S1.60 and $1.70 per yard, but 
agreed between themselves that each was to do half the work if either one 
received the contract. The Steel Co. rejected these bids as being too high, 
and a subsequent modification of the requirements by the War Dep't caused 
a bid for $1.25, made by one of the contractors, to be accepted. The work was 
done and duly paid for. The actual cost was 9c per yard, and the second 
contractor sued the first for an accounting in accordance with the private 
agreement between them. The U. S. Court refused to entertain the suit, on 
the ground that it was a conspiracy to defraud the Steel Co., and was thus 
illegal and void. The Court remarks: "Viewed from the standpoint of morals, 
square dealing and commercial integrity, combinations for collusive, mis- 
leading biddings, wherever made, cannot be approved." 

The right of courts to declare a contract void because contrary 
to public policy is a very delicate and undefined power and should 
be exercised only in cases free from doubt ; prejudice to the public 
interest must clearly appear before a court is justified in pronounc- 
ing an agreement void upon this account. (65 Vt. 431.) 

Contracts bearing upon Public Policy form a very extensive 
category, while the outline just given of the principles governing 
them is meagre. A few instances where the practice is well settled 
will assist the engineering student to grasp the general trend of 
this question, the details of which often engage the keenest study 
of statesmen and jurists. Plainly included in contracts opposed 
to public policy are those whose enforcement would be detrimental 
tc the public welfare, such as contracts to obstruct justice, to 
encourage litigation, or to restrain freedom of trade, as already 
noted. (See § 27.) 

So also are certain provisions in engineering contracts which 
confer excessive, or highly arbitrary powers upon the engineer, 
or provisions which bargain away the contractor's legal rights. 
The public policy element is found in the theory that lawful 
agreements cannot be made which tend to oust the courts of their 
proper jurisdiction, since these agreements deprive the parties 
of their legal right to have their grievances and disputes heard by 
a properly constituted tribunal, such as a court of law. Agree- 
ments, however, which make resort to arbitration a condition 
precedent (see § 73) before going to law are held vaHd.* 

34. With reference to the functions of the State, contracts which tend to 
interfere with or control the legislative or executive departments of govern- 
ment, or such as tend to the obstruction or perversion of the administration 
of law, are all contrary to public policy. An ant illustration is an agreement 
for compensation for procuring legislation made with a member of the legis- 
lative body, it being a palpably bad policy, as Mr. Justice Field has said, to 
allow the legislator's judgment to be misled, or to substitute other motives 
for his conduct than the advancement of the public interests. To the same 

* See Appendix Note 2. 

19 



§35 CONTRACTS 

end, bargains to secure appointment to public office or to divide the receipts 
of such office with a rival candidate, or for an officer to agree to accept a less 
compensation than that provided by latv^, are void and contrary to public 
policy. 

The same is true with reference to contracts looking toward 
the obstruction of justice. Examples of these are: — agreements 
to stifle criminal proceedings (as to shield, or to acquiesce in the 
acts of an embezzler), or to withhold evidence, or agreements 
to absent one's self from the jurisdiction during a trial so that 
he cannot be called into court as a witness; contracts to invade 
another's property rights, to maintain a nuisance, to commit a 
trespass; contracts to forfeit one's legal rights (for instance, 
agreements often found on railroad passes to relieve the Railroad 
Company from damages due to its negligence), — all these and 
many other kinds of contracts may be void as opposed to public 
policy. (See Appendix Note 3 for Railroad cases.) 

35. In leaving the topic of lawful subject matter, it should be 
said that it is impossible to completely classify the various sub- 
jects upon which lawful contracts may be made. They have, 
in fact, been grouped and specialized .to such an extent as to 
require treatment separately, as for instance, sales, insurance, 
negotiable instruments, partnership, landlord and tenant, surety- 
ship, building agreements, master and servant, bailments, carriers, 
and so forth. Around each of these subjects has grown up a 
distinct body of rules and doctrines, known as the Law of Sales 
or Insurance, etc., all presenting marked peculiarities yet forming 
mighty branches of the same parent trunk, — the Anglo-Saxon 
system of common law. 

36. (3) CONSIDERATION. — Of the four essentials to 

a contract, consideration is 
probably the most difficult to analyze satisfactorily. While cer- 
tain instances of consideration will be easily understood, others 
may appear obscure. Consideration is the act or forbearance of 
one- party which is given in exchange for the act or promise of the 
other. 

The fundamental idea is that of an exchange. The promise must ba 
bought and the one requisite is that something must be given for it in exchange 
for the obligation assumed. To illustrate, in a contract of insurance the 
Company promises to pay a certain sum of money under certain conditions, 
th? consideration for the promise being the payment of the premium by the 
insured. 

A common test is, " Does the plaintiff (promisee") suffer a legal deiri- 
ment'"! If this can be answered in the affirmative and if the promisor (de- 

20 



CONTRACT ESSENTIALS §39 

fendant) requested the thing done or given by the plaintiff, then the considera- 
tion is good and will support a binding contract. 

In a famous New York case, an uncle promised his nephew S5,000 if he 
would not drink, swear, nor gamble until he was 21. The nephew lived up 
to the bargain, but the uncle refused to pay. The court said that the nephew's 
act in abstaining from doing something which he had a legal right to do, con- 
stituted a legal detriment, and was a sufficient consideration. Here the 
exchange was the giving up the right to do these things at the uncle's sug- 
gestion and request; it was an act for a promise. (124 N. Y. 538.) Other 
illustrations of an act for a promise are where a landlord gives up possession 
of the premises in return for a promise to pay the rent; a servant gives time 
and labor in consideration of wages or salary. 

37. Another common type of consideration supporting a 
binding contract is where there are mutual promises, — "a, promise 
for a promise." The engineering contracts in which we are 
especially interested are generally in this class, and in them the 
contractor promises to faithfully perform, etc., in return for the 
owner's promise to pay the stipulated sum when due. Another 
instance would be where A promises to buy certain goods at a 
fixed price when made, and B promises to manufacture the goods 
and to sell them to A at that price. 

Where there is an act for a promise, the promise being on one 
side only, the contract is said to be unilateral; when there are 
mutual promises, it is called bilateral. The point of the whole 
discussion is that a consideration is a prime necessity in the 
making of a good contract, since an agreement to do or to pay 
something on one side without compensation on the other is void 
at law. To use a historical phrase, if the promise made on one 
side meets no mutual and corresponding support from the other, 
the first is nudum pactum, a " mere naked promise," insufficient 
to support a good contract. 

38. Similarly, it appears that a gratuitous promise is not bind- 
ing at law. This means that where a person promises to do a 
thing that he is already legally bound to do, such an additional 
promise can not serve as the consideration of an agreement upon 
which to base claims of additional compensation. 

In a famous case, A's property being on fire he promised the Chief of the 
Fire Dep't $1,000 if he would do his utmost to extinguish it. The fireman did 
this and sued A for $1,000. Should he recover? 

No. Since the plaintiff was already legally bound to do his utmost to 
put out the fire his act could not be sufficient consideration for A's promise, 
which though made under the stress of great excitement was yet, in the eye 
of the law, merely gratuitous. (55 Wis. 496.) Likewise a promise to pay a 
debt already due was held not to be a good consideration. 

39. In the above class, and of particular interest to engineers 
are cases where the contractor throws up a job but promises to go 

21 



§40 CONTRACTS 

on and complete it if the owner wili agree to pay him a certain 
further amount. The owner may acquiesce in this, but as the 
contractor is already legally bound by the terms of the original 
agreement to fully complete the work, his promise to do that 
which he has already agreed to do cannot make a good con- 
sideration for the owner's promise to give him additional pay. 
As a result, the owner's promise is, in law, purely gratuitous and 
the contractor can collect nothing under it. 

40. But if there is a real hardship invoh-ed in camming out the contract 
and the parties in good faith wish to get together, two ways out of the difficulty 
are open. First, they may by mutual agreement cancel, annul, abrogate 
and completely do away with the existence of the old contract, in which case 
both parties, of course, waive all their rights under it. Then they make an 
entirely new contract upon better terms for the completion of the work, 
and the owner's promise would then be a good consideration for the contract- 
or's promise to perform. The point is that the contractor shall not be allowed 
to bull-doze the owner as often as he sees fit by threatening to quit, extorting 
each time a new and additional promise for more money from the owner, on 
his own side only promising that which he is already bomid to do, perform 
the original contract. Second, the original agreement is still kept in force, 
i.e. the contractor does not commit a breach of it nor does the owner in any 
way waive his rights under it. Then, for the performance of some trifling 
and nominal matter outside the original contract, the owner may agree to pay 
the contractor the amount which both feel to be justly due him on the first 
contract. It may be stipulated that this small contract which may be abso- 
lutely trivial, shall not be performed until a certain date, or not until the main 
contract is wholly completed, or some other provision may be inserted to 
prevent the owner's being tricked out of the second sum. Thus justice could 
be done and at the same time the necessary principle of law upheld that a 
promise which forms the consideration of one contract cannot at the same 
time form the consideration for another. 

41. When disputes arise as to facts, if the parties are acting 
in good faith, mutual demands and mutual compromises may 
also serve as good consideration, since it is a settled policy of 
the law to encourage people to get together and patch up their 
disputes without bringing them into court.* Unilateral or bilat- 
eral forbearance likewise serves as good consideration. 

Where A agrees for a sum of money to discontinue a suit against B upon 
a claim which he knows to be bad and unenforceable, the contract is invalid 
for want of consideration. This is not because having no legal right to sue 
B in the first place he has given up none, nor is it because there wasa benefit 
to B (the promisee) in having even a groundless suit against him discontinued; 
but because, as said earlier, it is not a question of benefit or detriment to the 
promisor A, but of legal detriment to the promisee B, which supplies the test. 

♦This case is not at all similar to that of blanket clauses in a contract 
making the engineer sole arbitrator. Here two people get together and make 
an agreement in the present to settle their difficulties "out of Court," — and 
this is a desirable result. The trouble with the arbitration case is that the 
parties agree in advance that they will surrender a certain right, viz. : that of 
being heard in Court. 

22 



I 



CONTRACT ESSENTIALS §44 

The case further illustrates the necessity for careful reasoning in the appli- 
cation of legal rules to cases apparently simple 

42. Kinds of Consideration. — Considerations are classified as 
" good " and as '' valuable.'" A good consideration is such as 
the ties of blood-relationship, or is one founded on natural love 
and affection, and it is not always effectual. Of this we have 
little to say, since it is '' valuable " considerations with which 
the engineer mostly deals. It is well stated in a New Jersey case 
that a valuable consideration is '' some forbearance, detriment, 
loss or responsibility given, suffered, or undertaken by the other 
party (the promisee) in return for a promise or an act." (34 N. J. 
Law 54). Thus our whole discussion will be seen to have dealt 
with " valuable " consideration alone. 

43. Adequate Consideration. — When the validity or binding 
power of a contract is under discussion there is a natural tendency 
for the layman to consider whether or not a fair price or compen- 
sation has been stipulated for the work to be done, or other 
benefit to be received. The rule of law is fixed that if there is in 
fact a real consideration, the question of adequacy will not be 
inquired into by the court. That is to say, if a man wants a 
thing he is the judge of what it is worth to him and it is not the 
function of the court to make bargains for individuals, but merely 
to see that they get the consideration bargained for. 

Of course this principle is not to be extended to absurdity, 
particularly if the consideration on each side is of the same sort 
or character, and are not then commensurate. Suppose a con- 
tract where a man agreed to pay golden eagles for$l-greenbacks. 
The court would be as likely to suggest a guardianship, or a 
lunacy commission, as to enforce such a contract. But on a con- 
tract to pay a considerable sum for personal services which was 
plainly far in excess of their true value, the contract was held 
valid, the court saying that the employer had a right to pay as 
much more than the services were worth as he pleased. (64 N. Y. 
596.) It must not, however, be understood that if the inadequacy 
of consideration is gross, and the transaction bears palpable 
evidence of fraud, the court will assist in carrying it out, for then 
it will refuse aid in its enforcement. 

44. IMPOSSIBLE CONSIDERATIONS. -—In a contract 

otherwise good 
if the consideration is a promise physically impossible of per- 

23 



§45 CONTRACTS 

formance, and both parties know it, the contract is bad. It 
would appear that the parties must either be insane or jesting 
When the impossibiHty is known to the promisor only, he mus^ 
lose, since the reliance placed upon his promise by the promisee 
is a sufficient detriment to sustain an action for damages. If the 
impossibility is known to the promisee but not to the one promising 
it stands to reason that the contract will be void. Otherwise great 
hardships and impositions would result to the innocent promisor. 

45. Closely cognate with the subject of Impossible Considera- 
tions, if indeed it is not substantially the same thing under another 
name, is Impossible PerfoRxMance of contracts. This is a topic of 
special interest to the engineering contractor since unforeseen 
conditions of the soil, as striking ledge in excavation where gravel 
or sand was expected, meeting unmanageable quicksand, or sub- 
terranean springs and the occurrence of tempests, floods, earth- 
quakes, or other calamities of nature, may suddenly put such an 
aspect on the contract that financial ruin stares the contractor 
in the face if he must indeed carry out the letter of the agreement, 
or even perhaps seriously attempt to do so. 

Does impossibility of performance relieve the contractor from 
liability in damages for non-performance? The case where the 
matter was known to be impossible by one or both parties at the 
time of making the contract has already been discussed. Our 
interest is especially in those cases where the impossibility arises 
stibseqtcent to the making of the contract, and here the result is 
held to depend upon the nature of the undertaking and upon the 
exact terms of the bargain. The rule is severe but just, for if a 
person promises absolutely and without quahfication that a 
certain thing shall be done within a given time, it being at the 
time neither impossible nor unlawful, then he is bound absolutely 
to carry it out. For against all ordinary contingencies he might 
have made contract provisions to relieve himself from respon- 
sibihty in the happening of the possible event. In faihng to do 
so he did not exercise ordinary prudence and must, perforce, take 
the consequences. (53 111. 102.) In such cases, performance is 
not excused by inevitable accident nor other contingency not 
foreseen nor under the control of the party. (165 N. Y. 247.) 

But this rather harsh rule is only appHcable where the contract 
imposes a positive and absolute obligation and is not subject to 
any quahfication or condition, express or impfied. It is just here, 

24 



CONTRACT ESSENTIALS §47 

probably, that the difficulties will arise, — what is the fair implica- 
tion from the language actually used? Pursuing this line of 
thought we come at once upon the topics of '' Express " and 
'' Implied " contracts and the rules for the *' construction " or 
interpretation of contracts (discussed at length in § § 68-9-70, 
which should be carefully perused in this connection). 

46. A typical case might arise thus: A contractor agrees to put in the 
foundations of a structure of a general type and to extend approximately 
to a specified depth. Upon making the excavation he encounters soil such 
that to insure the safety of the proposed structure he must modify and enlarge 
the foundation plan and practically double its cost. Must he do this and 
still receive only the price originally agreed upon? The contract as at first 
contemplated, has become impossible of performance. What are the rights 
of the parties now? The answer to the problem hinges upon the exact lan- 
guage used in the contract. Was there any provision for "extras"? Did 
the builder agree in such a way as to positively assume all risks as to the sub- 
soil? If the document does show an unqualified assumption of this risk, then 
he is bound to fully perform even to the extent of putting in the extra founda- 
tions. And if he fails to go on with the contract, under this supposition, the 
owner has a right to sue for non-performance. But suppose, on the other 
hand, that to induce the making of the contract the owner used language 
plainly implying that he warranted the condition and quality of the subsoil. 
Then as this warranty is now broken the contractor can withdraw on the 
ground of misrepresentation, and the owner can get no damages because of 
the builder's failing to go on with the work. The owner must pay the fair 
value, or cost of the work already done. That the whole situation is a rather 
delicate one, and that the question of what is really implied in addition to 
what is expressed is frequently subtle though extremely important, will 
be indicated by these words from a Federal Court: "Where the event which 
prevents performance is of such a character that it cannot reasonably be sup- 
posed to have been in the contemplation of the parties, they will not be 
bound by general words, which, though large enough to include it, were 
not [in fact] used with reference to the possibility of the particular con- 
tingency which afterwards happens." (102 U. S. 64.) 

47. It thus appears that the '' rules of construction " (or con- 
struing contracts) have an important bearing here. Since 
the parties have in writing expressed themselves thus and so, 
will the rules of evidence permit a demonstration of what they 
meant (or really had in mind) by other and extraneous means, 
as for instance, by the oral testimony of interested persons? 

The moral of the whole matter is this: In the 

preparation of an engineering contract, strive to foresee every 
reasonably possible contingency which may arise to render its 
performance impossible. Then in the most precise, compre- 
hensive, and lucid language possible, outline what are intended 
to be the rights and obligations of the parties in the event of 
such contingencies arising. Trivial details need not be striven 
for since if there is a fairly bold outline of what is intended, the 

25 



§48 CONTRACTS 

court will, as a matter of judicial interpretation, supply a reason- 
able and just implication of those consequential details which 
follow the spirit of this main outhne. 

48. Proof of Consideration. — Two questions are presented: 

(a) Was there any consideration at all? The natural place 
to look for proof is in the terms of the instrument. Yet in a simple, 
or " parol " contract (one not under seal) most courts hold that 
the consideration need not be stated if there really is one. 

(b) Is the statement found in the contract proof of what 
the consideration is? If the consideration is a promise to do 
something, then the terms as stated will bind the parties. They 
cannot be controverted. (454 Mo. App. 636.) But where the 
consideration was stated in the contract to be a certain sum 
of money, and this had been paid over, parol evidence was allowed 
to show the true agreement, as for instance, that the true amount 
was greater than the sum stated. 

49. SEAL. — Anciently the matter of a seal was of great 

importance in the making of contracts. Its 
significance is now greatly lessened, and in some States it has 
fallen into entire disuse. Contracts under seal are called " spe- 
cialties " or " bonds," and this was the most solemn form of con- 
tract known to the English common law. Its interest in the pres- 
ent connection is that at common law the presence of a seal did 
away with the necessity for a consideration, thus forming an 
important exception to the general rule. But in many States 
the distinction between sealed and unsealed instruments has 
been abolished. This is too technical a matter to be entered upon 
here, however, since in practice the local statutes should be 
ascertained and must then be followed. 

50. FAILURE OF CONSIDERATION. — This results from 
the worthlessness or insufficiency of consideration, originally 
apparently good. 

Examples, property purchased which proves worthless, or has passed 
out of, or has never come into existence when the contract is executed. In 
another case a promissory note was given in payment for a patent right 
which proved to be invalid. The maker of the note was relieved from pay- 
ment. (148 Mass. 352.) Of the same sort was a case where a ship-load of 
goods at sea was sold after the vessel was lost, and another where a set of 
farm-buildings was sold after they had in fact burned down. 

There are many other phases of this matter of consideration 
which cannot be entered upon here Text-writers in the law have 

26 



CONTRACT ESSENTIALS §53 

written whole books upon it. Enough has perhaps been said to 
allow the engineering student to grasp certain of the main 
features. 

51. (4) AGREEMENT OR MUTUAL ASSENT. — This ele- 

ment 
means the concurring of two minds in the same opinion, purpose 
or understanding of a course to be pursued. We are here dealing 
with the purely mental phase of contract-making. The student 
need apprehend no real difficulty, therefore, in grasping the full 
significance of the ancient rule, " In contracts there must be a 
real meeting of the minds, ''^ which phrase aptly expresses the 
fundamental principle of contract law. 

52. In general, there must be a mutual willingness and assent 
to enter upon and be bound by the bargain as understood, for it 
is fundamental that there is no contract unless the parties assent 
to the sam.e thing in the same sense. This does not mean that one 
must read the secret thoughts or intentions of the other, since the 
rule of law is satisfied if there is a plain request on one side and 
as plain an assent on the other. This brings us to an extensive 
subdivision of our topic, viz.: Offer and Acceptance, more fully 
treated elsewhere. The present purpose is to look at those cases 
where there is said to be '' UnreaHty of Consent," its importance 
arising because of the reasonable and just rule that '' The consent 
(or assent) of the contracting parties must be real and genuine." 
The cases, or causes of unreality of consent are usually classified 
as arising from Mistake, Misrepresentation. Fraud, and Duress, 
each of which will be discussed briefly. 

53. MISTAKE. — Anson, a famous writer on Contracts, 
gives this as the technical meaning of the word: — '' Where the 
parties have not meant the same thing; or though meaning the 
same thing, have formed untrue conclusions as to the subject 
matter, it is ' mistake.' " A mistake of expression may perhaps 
be corrected or explained by permission of the court, but this must 
be clearly distinguished from mistake of intention, or mistake in 
understanding, and from mistakes of omission where one party 
fails to get into the contract all the terms agreed upon. In such 
a case he may fail to bind the other party to fulfillment. 

Anson classifies possible instances of mistake as follows: — 

(a) Mistakes as to the Nature of the Transaction. This, he 

says^ is of very rare occurrence, since men generally know what 

27 



§54 CONTRACTS 

they are contracting about, and it will generally arise only through 
some misrepresentation or deceit by a third person. 

In a case where a deed was signed by an illiterate person who was told 
by an outsider that it was a release for arrears in rent, it was held to be a mis- 
take due to misrepresentation and the deed was void, (56 N. Y. 137.) 

This distinguishes the case from fraud where the deceit must be per- 
petrated by one of the principals to induce the other to enter the contract. 

If a person in full possession of his faculties and able to read, 
signs a paper or note under the belief that it is a contract of a 
different character, and not having read it he relies upon the 
representations of another as to its contents, it is generally held 
that he will still be bound by it if the instrument later comes into 
the hands of one who purchases it innocently and without notice 
of the signer's mistake. 

54. (b) Mistake as to the Person. Since one person contracts 
with another having in view the character, reputation, and 
financial responsibihty of the other party, it is plain that there is 
a misunderstanding, and hence no real meeting of the minds, if 
by mistake, another person is substituted for the one the first party 
intended and supposed he was making the contract with. For 
a case to illustrate this, see § 273. 

55. (c) Mistake as to Subject Matter. Under this topic there 
are numerous shades of significance indicated by the varying 
circumstances, and to frame an intelligible and brief rule is not 
easy. It is said that it must clearly appear that the party, with- 
out any fault of his own, made an agreement contrary to his real 
intention. This must be distinguished from a case where a man 
forms an erroneous judgment, or errs as to the scope of his own 
legal powers or authority, since then he will probably find the 
contract only too binding. He goes into the contract knowing 
what it is about and though a course of wrong reasoning may have 
led him to take the step, still he wiU be bound. But if withottt 
his own fault or negligejice he enters into a contract contrary to his 
real intention, and because of a real misunderstanding of the 
subject matter, he will not be bound. In this class are cases where 
the parties have agreed upon the subject matter, but unknown 
to them it has ceased to exist ; or where each has different articles 
of the same sort in mind ; or where one is aware that an article 
does not possess certain important qualities and does not inform 
the other, who. believing that the articlec^oc^ possess these qualities, 
is led to make the bargain. Such might be a case where an 

28 



CONTRACT ESSENTIALS . §57 

engineer states plainly that he must have quick-setting cement 
and is knowingly furnished by the dealer with what proves to 
be a slow-setting brand. In such cases the contract is not binding. 

56. MISREPRESENTATION. — Anson says : " If one of the 
parties has been led to form untrue conclusions respecting the 
subject matter by a statement innocently made, or facts inno- 
cently withheld by the other, this is misrepresentation. '^ This 
definition should be kept in mind when considering fraud, 
since on the face they would appear to be the same. The 
significance of the differentiation is that misrepresentation in- 
validates the contract and no rights arise under it,* while 
fraud not only voids the contract but also gives an action 
(i.e., a right to sue) for damages, Anson mentions that in 
contracts for marine, fire, and life insurance, and in the sale of 
land, this sort of misrepresentation, i.e., the innocent non-dis- 
closure of material facts, is fatal to the formation of the contract. 
Without stopping to pursue this matter further, enough has per- 
haps been said to direct the engineer's attention to a subject 
which may easily become of considerable importance to him. 

57. FRAUD. — Every one has a general notion of what con- 
stitutes fraud, but the expounders of law have, in the interests of 
justice, found it necessary to set up certain rigid and technical 
standards by which to measure situations. If the technical 
elements of fraud are not found, then in law no fraud exists, even 
though there is great wrong from a moral or ethical standpoint. 
The spirit of the law seems to be that it is better to have a dozen 
guilty go unpunished rather than that one innocent should be 
injured. 

The essential elements which go to make up fraud are: — 

(a) False representation of a material fact ; 

(6) Made with a knowledge of its falsity, or in reckless disre- 
gard as to whether it was true or false ; 

{c) Made with the intention that it should be acted upon by 
the plaintiff ; 

{d) And being believed by him, the plaintiff was induced to act 
by it ; 

{e) And he thereby suffered damage. 

♦The essence of the distinction is that "representation" is regarded as an 
element of the ''meeting of the minds." If there is no " meeting" there is 
no contract. In fraud the "meeting" is sufficiently consummated but the 
deceit practiced gives important rights against the deceiver 

29 



§ 58 CONTRACTS 

Though easily stated, the complete identification of all these 
five elements in a given set of facts is often difficult. In fraud, 
as in other fields of legal study, cases of all shades of significance 
will be found. Each of the foregoing five elements may be split 
into several others for separate study and discussion, and since 
whole treatises have been written on this subject, their enumeration 
is all that can be done here. In this connection the student 
should read carefully the sections on lUegahty and Fraud, § 326, 
etc. 

58. DURESS. — Perhaps money is paid, a document is signed, 
or assent given to a proposition, under such compulsion and 
coercion that in law the act will be regarded so far involuntary 
as to invalidate the bargain agreed upon. The consent was 
" unreal," — there was no '' meeting of the minds." This is what 
is meant by duress. To constitute duress there must be some 
actual or threatened exercise of power possessed (or believed 
by the constrained party to be possessed), by the party exacting 
or receiving the payment, over the person or property of the one 
assenting, from which the latter had no means of immediate 
relief other than by giving the consent sought. 

At common law two kinds of duress were recognized, (a) of 

imprisonment, ih) of threats, (a) referred to imprisonment of 

the party, or of one closely related to him, and ib) was actual 

or threatened physical violence to such a party. 

These rules of the common law are having their limits extended con- 
siderably in the United States, however, at the present time. To be obliged 
to sign an important paper at the point of a pistol, for instance, may be 
highly melodramatic in a storybook, but is not likely to happen to the engineer 
of to-day. It is entirely conceivable, though, that a contractor or the owner 
could be placed in such circumstances that the coercion to sign or enter upon 
an agreement might amount to duress. 

The Supreme Court of the United States has held that con- 
tracts procured by threats of battery to the person, or of destruc- 
tion of goods and property, or trespass to lands, would constitute 
duress ; but that a mere threat of a lawsuit is not duress where 
there is no danger of injury, or destruction of property, and there 
is an opportunity to try the thing out legally, but the party yields 
merely to avoid litigation. (101 U. S. 465.) The ultimate fact 
to be determined is whether the party really had a choice and the 
freedom of exercising his will. It is noteworthy that duress has 
the same effect as fraud* upon the contract, i.e., it is not neces- 

* See also Misrepresentation § 50. 

30 



CONTRACT ESSENTIALS §59 

sarily void, but voidable at the option of the party constrained. 
The injured party may disaffirm the contract, or he may expressly 
or impliedly ratify it. 

59. Undue Influence is a subject closely akin to duress, and 
merits a word here. The very title suggests why it vitiates the 
"meeting of the minds." Anson says: "Circumstances may 
render one of the parties morally incapable of resisting the will of 
the other, so that his consent is no real expression of intention. 
This is undue influence.'' This principle has been chiefly de- 
veloped in the system of jurisprudence called " equity," and 
is a way in which courts have guarded persons against those who 
would take advantage of their improvidence, moral weakness, 
or of their ignorance and unprotected situation. When from 
the relative positions of the parties the presumption of undue 
influence arises the contract cannot stand unless the party claim- 
ing the benefit of it can show that it is fair, just and reasonable. 
Cases where this point has arisen are between guardians and their 
wards, attorneys and their chents, doctors and their patients, 
etc. The test is: Was the influence, whether great or small, 
sufficient to destroy freedom of the will so that the act in question 
was the result of the domination of the mind of another? If 
established, the party unduly influenced has the right to rescind 
and he will not be bound by a subsequent affirmation unless it 
is clear that the influence or difficulty under which he labored is 
entirely removed. 



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32 



QUESTIONS 

Questions for Study and Review 

on 

Chapter I and Chapter II 

1. Why should the engineer understand the law of contracts? 

2. Discuss the importance of studying the elements of business 
law. 

3. What are some of the arguments for the study of business 
rules by the engineer? 

-4. Why should even a moderate knowledge of business law be 
specially valuable to the engineer? Compare his training with that 
of the ^^ business " man. 

5. What are some of the engineer's ordinary business duties? 

6. Educationally, what may be said of the study of contract 
law by engineering students? 

7. What are some of the fields open to the engineer familiar with 
business practice? 

8. Explain why the contractor should have a technical training. 

9. What is the scope of contract law to be outlined in this book? 
What is its relation to engineering contracts? 

10. Can you detect the wisdom in the rule: Ignorance of the law 
excuses no one? If so, explain. 

11. Enumerate the valuable features in a just and equitable 
engineering contract. 

12. What are the probable reasons for many impracticable con- 
tracts? 

IS. Define " contract.'' 

14' When is a contract enforceable? 

15. What are the four essential elements of a binding contract, 
and how have they become established? 

16. In what ways will a knowledge of general contract law 
specially assist the engineer? 

17. Recite upqn the antiquity of contracts and their relation to 
civilization. Name contracts for six different purposes. 

18. Epitomize carefully in one sentence the meaning of " com- 
mon law.'* 

19. What is the form in which legal rules are usually given? 
Why is this? 

20. Recite upon the usefulness of technical terms. 

33 



CONTRACTS 

21. Enumerate those who are not '' competent parties^ What 
peculiarity can you discern as underlying the whole class? 

22. To whom do the terms of a contract apply? 

23. State tJie common grounds of illegality in contracts. 

24. State tJw nature of the legislative restrictions which engineer- 
ing contracts may encounter. 

25. What may he the effect upon the contractor if these are not 
complied with? 

26. What are the duties of the parties before entering upon an 
important engineering contract? Discuss the maxim, " Ignorance 
of the law excuses no one,^^ in this connection. 

27. What is Wait's advice to engineers and contractors as to 
meeting statutory requirements? Effect of non-compliance? 

28. What is the importance of " Lien and Labor " laws to the 
contractor? What is their purpose? 

29. Recite as far as possible upon contracts in restraint of trade. 

30. What is the relation of Sunday laws to our subject? 

3L Explain the object and origin of the Statute of Frauds. 
Tell why it was necessary, and how it accomplishes its purpose. 

32. What are the ''one-year'' and '' $50 "-rules? Why are 
engineering contracts in writing? 

33. Will a contract coming clearly within the provisions of tJie 
Statute be unlaivful if it has been fully performed, i.e. is either of 
the parties subject to a law-suit because of having carried it out? 

34. How does the Statute bear upon the making of deeds and 
leases? 

35. What is meant by " oral " contract? Is such a cojttraci 
binding at law? 

36. Which will it generally be harder for tJie engineer to satis- 
factorily jneet in contract-ivriting, statutory restrictions or those 
imposed by the common law? Explain carefully. 

37. Cite four examples of contracts opposed to common law. 

38. What parties are bound by tJte terms of a contract? Explain 
the position of the surety or bondsman in engineering contracts. 

39. What contract obligations does the bondsman assumef 
With whom? 

40. Explain how " tinkering " with the construction contract 
releases the contract of surety. Hoiv may this be avoided? 

41. What is meant by contracts " opposed to public policy "? 

42. By whom is public policy declared? Under ivhat con- 
ditions may this be done? 

34 



QUESTIONS 

43. Enumerate five examples of contracts opposed to public 
policy. 

44' Can yon tell why arbitration clauses in engineering con- 
tracts are likely to be regarded as against public policy? 

45. Which is the larger group, that of contracts whose subject 
matter is lawful or unlawfnlf Name some of the common law 
branches of contracts. 

46. Explain carefully what is meant by '' consideration." 

47. What is the essential idea underlying a good consideration? 
Discuss the '' legal detriment " rule. 

48. Give illustrations of " gratuitotts promises." What is their 
legal effect? 

49. Where is the consideration in a bilateral contract? Illus- 
trate. 

50. Discuss the gratuitous-promise-rtde in connection with the 
contractor who claims he is losing money and refuses to continue the 
work. 

51. How may hardship be avoided under the above circum- 
stances? 

52. Recite upon mutual demands, compromises , or forbearances 
as consideration. 

53. What is the ultimate test for the detection of a good con- 
sideration? 

54. What kinds of consideration are there? Illustrate. Which 
have we discussed? 

55. Explain carefully the doctrine of " adequate consideration." 
Does this appear reasonable to you? Why? 

56. When will inadequate consideration invalidate the contract? 

57. Suppose A and B enter into a contract under which A is to 
fly to the moon and return within one year from date. Can B recover 
damages by reason of A^s failure to do so? Why? 

58. State the rule as to impossible considerations. 

59. What is the engineer's special interest in the topic " Im- 
possib le Performance' ' ? 

60. What is the contractor's position when the impossibility 
arises subsequently to his entering upon performance? 

61. Does such impossibility relieve the contractor from liability 
for non- performance? Why, or why not? 

62. What is the relation of ^^construction " of contracts and 
t' implied " contracts generally to this discussion? 

35 



CONTRACTS 

63. State the case where the contractor is building from a plan 
showing foundations which are found to he inadequate. 

64. How will the prudent contractor have secured himself in 
such a case? 

65. Summarize the practical value of the foregoing analysis of 
impossible performance to the contract-writing engineer. 

66. Is it necessary to state the consideration in a contract? Sup- 
pose it is stated, what is the effect? 

67. What distinguishes *' specialties " and " bonds " from 
other contracts? 

68. What was the connection between seal and consideration 
at common law? 

69. What is the effect of " failure of consideration^*? Give 
illustrations. 

70. Define the elem£nt '' Agreement.** 

71. What do you understand by " unreality of consent "f lis 
effect is ivhat? 

72. Name the classifications under '' Unreality of Consent.** 

73. What kinds of m^istakes are recognized in contract law? 

74' Give a case illustrating mistake as to nature of the trans- 
action. 

75. Suppose a person negligently signs a paper but later claims 
mistake as to subject matter. Is he bound? What practical advice 
could you give in such a matter? 

76. Under m^istake as to subject matter how can the injured per- 
son secure his rights? 

77. Suppose the mistake is one of judgment upon admitted 
facts. Then what? 

78. State clearly the differences between " Misrepresentation ** 
and '' Fraud.** 

79. Why must the technical elements of fraud be found in order 
to establish a suit for damages? 

80. Enumerate the essential elements of fraud. What if 07te is 
missing? 

81. What is meant by " duress **? 

82. Cite instances which have been held to be duress. What is 
the ultimate test for its detection? 

83. What effect does duress have upon the contract? 

84. Tell what you understand by '' undue influence.** What is 
the test question? 

36 



Chapter III 

DEVELOPMENT OF CONTRACT 
PRINCIPLES 

This chapter will present some developments of the foregoing contract essentials 
which ma}^ be said to clothe the skeleton with life. The bare principles 
will be amplified and expanded as the needs of society and of the business 
world have required. It will now be in order to deal somewhat with the 
classification of express, implied, and conditional contracts. We may 
then examine into some of the properties or qualities of all such instru- 
ments, and consider, for example, what laws must be consulted in deter- 
mining their powers and effects; what the results of alteration maj' be; 
the numerous ways in which the contract may be discharged, and its ties 
loosened; what the general canons are for the interpretation or " con- 
struction" of contracts; what damages may be had for breach, etc. We 
shall see that all sorts of contingencies may be provided for without hard- 
ship; that actions speak as loudly as words; that the essential meeting 
of the minds is well evidenced by offer and acceptance, and even when 
the parties have made an express statement, it may yet be most difficult 
to ascertain just what they really meant. 

CONTRACTS CLASSIFIED 

60. (1) EXPRESS CONTRACTS. — Express contracts arise 

only through an ojjer 
and acceptance. There is an offer when one person communicates 
to another the terms upon which he is willing to enter an agree- 
ment with the second person. Communication of the acceptance 
to the offeror (the person making the offer) by the offeree (the 
person to whom the offer is made) closes the contract, and there 
exists a binding agreement from that moment. To make such 
contracts, no particular formalities are necessary. They may be 
made by letter, orally, by telephone, telegraph, and almost by 
conduct alone (which would then make it an implied contract, 
see § 68), so close to the line a given set of facts may lie. In a 
certain sense there is no distinction between an express and an 
implied contract, since one is as real and binding as the other. 
What we are now concerned with is how the contract springs into 
being. The test in either case is, '' Was there a real meeting of 
the minds, and an intention to contract?" 

61. HOW MADE. — But one should bev/are of mere nego- 
tiations or counter-proposals intended to be merely preliminary 
to the real agreement, as when, for example, there is a series of 

37 



§ 62 CONTRACTS 

letters containing proposals, questions, answers, etc. The guiding 
rule may be briefly stated: In order to make an express contract, 
there must be a definite offer, and an unquaUfied, unconditional, 
and unequivocal acceptance of the offer in all its terms. Failing 
this, there is not an express contract. But this is not saying 
that an imphed contract may not arise from the transaction. 

From the above statements it may be seen that all important 
contracts relating to engineering or other work should be piecise, 
concise, and in writing, as this is the best form of evidence of the 
real intention of the parties, and is therefore most likely to save 
future trouble. 

62. An offer is not binding until accepted. But the offer 
may well dictate- the time, place, and terms of acceptance, and 
may make a compliance with these details a real condition prec- 
edent to the formation of any contract at all. In effect, such 
an offer says, for example, " If you do not reply before such a 
day, or in a particular way, there shall be no contract even if you 
accept unconditionally in some other way, or upon the day after." 
The engineer or contractor should note that published instruc- 
tions to bidders, where work is to be let, fall plainly under this 
rule. Much loss and inconvenience has often followed from neg- 
lecting to observe it. 

63. ACCEPTANCE. — In general, acceptance is complete 
from the moment the answer is despatched by the acceptor, and 
in most States it is not even essential to the validity of the con- 
tract that the answer ever be received by the proposer. This 
apparently anomalous doctrine is worked out on the theory 
that if an offer is sent by mail, for instance, this constitutes the 
postal department the sender's agent to deliver the offer; and 
thereby the recipient is tacitly authorized to use the same agency 
to return his acceptance. Now as the principal is responsible 
for the acts of his agent, the risk of never receiving the 
reply rests upon the offeror and not upon the offeree. On this 
basis, there is a contract existing from the moment the letter is 
dropped into the mail-box. When there is any difficulty arising 
through such circumstances, of course the offeror will probably 
claim no contract was made, and the acceptor must therefore be 
able to prove by suitable evidence that he did in fact mail the 
letter. This could be done by having suitable witnesses to the 
act, or better and simpler, by registering the letter. 

38 



CONTRACT PRINCIPLES §67 

The theory just outhned was early dissented from, however, by the Courts 
of Massachusetts, and so for nearly a century, in that Commonwealth, it has 
been held that the contract is not complete until the acceptance is received 
by the offeror. 

64. There is no formality required for an acceptance, save that 
it must be unconditional, and identical in terms with the offer. 
What constitutes an acceptance will depend upon all the circum- 
stances, since it may sometimes be fairly implied. It is to be 
noticed, however, that in law, silence (alone) does not give consent. 
Neither does a mere mental resolution to accept create a valid 
acceptance; there must be some overt and unequivocal act evi- 
dencing the resolution. As previously indicated, an uncon- 
ditional acceptance cannot be withdrawn, since making it ripens 
the offer into a binding contract. 

65. REVOCATION. — It should be noted, in distinction to 
the foregoing, that a revocation of an offer is ineffective until 
actually received by the offeree. This is explained by saying that 
if I have made an offer to another, he in good faith may suppose 
I mean it, and act in reliance upon that offer. Thus he may incur 
extensive obligations by reason of my offer, so that great hardship 
would result from my withdrawal. The very least I can do is 
actually to bring home to him the fact that I am no longer backing 
up the offer. In a word, I may withdraw too late to escape. 

66. PUBLIC OFFERS. — An offer may be addressed to the 
public by an advertisement, circulars, posters, etc. In these 
cases acceptance will usually be by conduct (as in reward cases) 
and no notice of acceptance will be given the offeror save notice 
of the performance. 

A public notice is a preliminary to nearly all construction 
contracts entered into by municipahties, as the law or ordinance 
usually requires them to advertise for bids to insure competition. 
It should be observed, however, that this offer to receive bids is 
no part of the contract, but is merely an offer to consider proposals 
which interested parties may choose to make. This public 
announcement may frequently dictate the terms upon wdiich 
proposals offered it will be considered, as for example, that the 
proposals must be received before a certain time, that a blank 
form for bidders must be used, that a certified check must accom- 
pany the bid, etc. 

67. A public offer to enter into a contract may be revoked in 
the same way, provided no one has acted upon it. This, of course, 

39 



§ 68 CONTRACTS 

is to prevent one from repudiating his just obligations when 
the acceptor has fully performed the contract, relying upon the 
public offer. This does not mean that if some one has acted upon 
the offer, it can never subsequently be withdrawn, but that it can- 
not be withdrawn with reference to him who has acted in reliance 
upon it. 

68. (2) IMPLIED CONTRACTS. — The subject of implied 

contracts is an extremely 
complex one, as there is a vast difference between discovering some 
last shade of significance in the words really used in an existing 
contract, and on the other hand, analyzing a set of facts or cir- 
cumstances and determining whether or not the law will imply 
a contract thereupon, the parties themselves never having men- 
tioned contract at all. The difficulties are also somewhat enhanced 
by the limitations of all language, for it is true that every expres- 
sion of intention, no matter how specific, must carry along by 
implication much more than is actually expressed. The law 
recognizes this fact, also, for the rule apphed in coming at the 
meaning of any instrument in writing is that all natural meanings 
and inferences are to be read into the words as used. This general 
matter is further developed under the topic '' construing,''^ or 
the " construction " of contracts (see § 80, et seq) — i.e.^ the 
parties having said so and so, just what is the legal effect of their 
words? 

69. As a rough but fairly safe guide for the detection of this 
type it may be said that there is an implied contract when, from 
all the circumstances, the parties show a mutual intention to contract. 

Example: Suppose A writes to B, a maker of surveying instruments, 
asking the price of such and such a transit. Upon being informed, he orders 
the transit to be sent him. This is plainly an offer and an acceptance. The 
case for an express contract would be even stronger if A, in his letter ordering 
the transit, mentioned the price quoted, or said in effect that he would remit 
the price quoted upon receipt of the instrument. But now suppose A, in 
his first letter, simply orders a transit that meets certain specifications, but 
does not mention any price that he is willing to pay. Upon receipt of this 
order, B ships the transit, with a bill for it. Under these facts, there is an 
implied contract to pay for the instrument, and B may sue A, if necessary, 
to recover the price of the transit. 

70. Following somewhat from the discussion just given 
implied contracts, a sound proposition is that the law will not 
imply a contract which is in any way illegal, as this would be like 
suicide to any theory of law. 

This point might be well illustrated by the following case: Suppose a 

40 



. CONTRACT PRINCIPLES §72 

foreign corporation built a bridge in another State without having first 
secured from the proper authorities a license to do business within that State. 
After having built the bridge, the corporation was not allowed to sue upon 
its contract (express), nor even to recover the cost of the work under an 
implied one. It might be argued that as the foreign corporation erected the 
structure, of which the other party received the benefits, therefore there is an 
obligation to pay for that benefit, even though the corporation had failed 
to obtain permission to do business legally in that State. The analysis will 
be assisted if we recall that only legally competent parties can make binding 
contracts (§ 23). In this case the corporation is legally incompetent, for the 
reasons just stated. Now if the law allows an implied contract to be de- 
clared as existing between the parties, the essential principle that only com- 
petent parties can contract is nullified and set aside.* (See § 264.) 

As we proceed, frequent mention will be made of implied con- 
tracts and the student is urged to give earnest effort to master 
their characteristics. Another excellent illustration of an implied 
contract, combined with a condition precedent, will be found in 
the passenger case outlined in Appendix Note No. 4. 

71. CONDITIONAL CONTRACTS. — The word ''condi- 

tional '' applied to con- 
tracts has practically the same meaning as in the common and 
popular sense, but the importance of certain of the conditions 
known to contract law, warrants special mention of it here. 

A contract is said to be conditional if its performance is made 
dependent upon some future, uncertain event or contingency. 
If that event does not happen then there is no obligation to per- 
form the contract. 

A familiar example is an insurance policy wherein the Company makes 
its liability ''conditioned" upon the happening of a certain event. If the 
property burns, then, in that event, the promisor's contract is to become 
effectual and enforceable. Otherwise not. 

72. The condition may be either express or impliedf, and if 
implied this will sometimes render the detection of an operative 
contract a very difficult thing. The test lies in ascertaining the 
intention of the parties. But if, on the other hand, the parties 
to a contract have, in plain, unambiguous language, made the 
happening of an event, or the observance of a certain requirement, 
the condition upon which the promise is to be performed, the 
courts wiU enforce their deliberate act. (103 N. Y. 341.) 

In contracts, three sorts of conditions are recognized: Con- 
ditions precedent, subsequent, and concurrent ov dependent conditions. 
We shall illustrate each in turn. 

* A somewhat less harsh result might be worked out in this case in the field 
of equitable jurisprudence known as Quasi-Contracts. See § 129. 
t See Appendix Note 4. "Implied Condition Precedent." 

41 



§73 CONTRACTS 

73. A CONDITION PRECEDENT is present when the per- 
formance of some promise is made dependent upon the doing of 
some act, generally by the promisee, or upon the happening of 
some event after the terms of the contract have been agreed upon. 
Such a condition must be strictly, hterally, and punctually per- 
formed, or a vahd excuse for noncompliance shown. (2 Petere 
U. S. 96.) Hence failure to perform such a condition is a breach 
of the contract and precludes recovery upon the same.* (12 Fed. 

Rep. 343.) 

Conditions precedent are of especial importance to engmeers 
since numerous important ones are frequently inserted in engineer- 
ing contracts. Thus, it may be provided that the engineer shall 
estimate, approve, inspect, and determine the amount due and 
to be paid for work done, in such a way that these things shall be 
conditions precedent to the contractor's right to demand payment. 
As there will easily be an opportunity for unfairness here, the 
courts are loath to enforce such a condition unless it is made 
plainly one of the terms of the contract. But if it has been so 
expressed, then the requirements must be strictly observed 
before the owner can be sued for work done. 

Again, it may be specified that the measurements of quan- 
tities ""are to be made thus and so (the contract being for a unit- 
price, e.g. 50c per cu. yd. of excavation) ; or " the hability is to 
be established or ascertained in the manner following," etc.; 
doing these things are conditions precedent to the right to sue for 
the value of work done. And it is well settled, also, that no 
question of ousting the court's jurisdiction enters such an agree- 
ment, since it is admitted to be well within the legal rights of the 
parties to covenant that no Hght of action shall arise until speci- 
fied things have been done, as that a third party shall pass upon 
their differences, etc. (17 N. Y. 173.) 

74. LANGUAGE TO BE USED. It has been repeatedly 
stated hitherto, that a highly important factor in determining 
the effect and vahdity of a contract is " the intention of the 
parties." This principle is equally important with respect to 
condition precedent. Therefore the use of the words " condi- 
tion precedent " is not necessary to create one. Mr. Wait (Eng. & 
Arch. Jurisp. Sec. 415) collects authorities and says, " to pay what 
the engineer shall certify the contractor is entitled to," — or " when 

* See Appendix Note 5. "Time Element as a Condition Precedent." 

42 



CONTRACT PRINCIPLES §77 

and not before the architect shall have certified/' — or, " to pay 
upon his estimate and certificate," — or, '^ to have the price payable 
after a certificate of approval shall have been issued by the engi- 
neer,'^ — or '' to pay upon approval and acceptance by the engineer 
and owner," — have each been held to be a sufficient expression to 
constitute a real condition precedent. Similarly, if materials 
are purchased subject to inspection by the engineer, they need 
not be accepted or paid for if rejected by him, and this condition 
may be nearly as well implied as expressed. Reflection will 
doubtless suggest other instances to the student. 

75. CONDITIONS SUBSEQUENT. — A condition precedent 
specifies something which must happen before the contract be- 
comes operative. A condition subsequent is present when it is 
provided that upon the happening of some event or contingency 
the obligation of an existing contract shall cease and be dis- 
charged, but the term implies some event other than the normal 
discharge of full performance. 

To illustrate, suppose A has made an agreement with S whereby he 
becomes the owner of a 100 H.P. boiler belonging to S. The express condition 
is that if he fails to take the boiler away within ten days, he forfeits the title 
already obtained, A calls for it two weeks later, but delivery is refused. 
Has he any remedy against S? 

76. Another, but less clear-cut, example would be found in a contract 
provision that if there is a default in performance, the owner shall have 
the right to complete at the contractor's expense. Here the default is a 
condition precedent to the owner's right, and a condition subsequent varying 
substantially the contractor's obligation. Conditions subsequent also occur 
frequently in conveyances of real estate, where the restrictive clauses are to 
the effect that if the buyer subsequently does thus and so, then his title is 
to be forfeited. The courts regard this type of condition (in deeds) as being 
somewhat opposed to public policy, and hold that such a condition must be 
very clearly expressed in order to be effective, and even then the result may 
often be in doubt. 

77. DEPENDENT CONDITIONS. — It will frequently hap- 
pen that the obligation of one promise is conditional upon the 
due performance of the other, and though each party is bound to 
be willing and able to do his own part, yet perhaps he is not 
bound to do it first. Where the conditions are mutual in such a 
sense that each depends upon the other, they are called dependent, 
concurrent, or mutual conditions. 

Illustration: An owner of land agreed to sell the same and deliver a deed 
on a certain day when the purchase money was to be paid. Being distrustful 
of each other, neither party was willing to do his part first. The Court held 
that the matters of delivering the deed and making payment were concurrent 
and dependent conditions. The point for the lay reader is that if one party 
performed the other could be made to do so, or else the valuable thing parted 

43 



§ 78 CONTRACTS 

with by either party, as the deed or the money, could be recovered. For if 
the implied concurrent condition be not met, there is no contract. 

78. To carry the point farther, suppose X sells certain well-drilling 
apparatus to Y for S900. But though the negotiations have resulted in an 
offer and an acceptance, yet they have not stated how or when the money 
is to be paid. Y wishes X to take his note for 30 days, but X mistrusts Y's 
financial responsibility and refuses to deliver unless Y pays in cash. Y wants 
the plant to use, and sues X for breach of contract for non-deHver\\ Can he 
recover? 

In the abstract, this is a good illustration of what is meant by concurrent 
conditions. In the law of Sales, however, this particular sort of a case is 
taken care of on grounds of business convenience and public policy by the 
rule that where no time is agreed upon for payment, then it is understood (or 
implied) to be a cash sale. Hence if Y does not come forward with the cash 
he cannot win his suit. 

79. Summarizing, it will be seen that the principal difference 
between a condition precedent and a concurrent condition is a 
matter of time. If the one thing must plainly be done wholly and 
completely before the other can be done, the condition is prec- 
edent ; but if the time of performance on both sides is practically 
the same moment, it is a contract with concurrent conditions. 
It is hoped these definitions have been made sufficiently clear, 
hence " conditions " will be pursued no farther here. 

CONSTRUCTION, OR INTERPRETATION OF 
CONTRACTS 

80. Attorneys say that probably seventy-five per cent of the 
litigation in court at the present moment is due to the fact that 
some one, either a lawyer or a layman, has at some stage of the 
proceedings failed to state with exactness and clarity just what 
was intended in a writing, or in an oral declaration. Consequently, 
whether this has resulted through ignorance, carelessness, or sheer 
slovenliness of expression, the document or statement must needs 
be construed, or interpreted by a court of law. In the attempt 
to systematize whole groups of ambiguous clauses there have been 
framed so-called " Rules of Construction." The student should 
note at the outset, however, that they are but a make-shift and 
a crutch to assist litigants over their difficulties. Obviously the 
proper thing is to render them unnecessary. 

81. The principal rule is to ascertain the real intention of the 
parties. (The central effort in lawsuits over the matter is to 
estabhsh the true significance of the word " real.") To accom- 
plish this result, the words used must be taken in their ordinary 
and popular meaning unless they have a special technical sig- 
nificance. If technical terms are used in a writing, these are 

44 



CONTRACT PRINCIPLES §83 

properly explained by oral testimony, although by the law of 
evidence, the terms of a written document cannot be varied by 
oral testimony. In arriving at a proper interpretation of the 
parties' meaning, all the given circumstances of time, place, and 
their relative positions to each other, and even general standing 
in society, may need to be considered as bearing upon their prob- 
able understanding and intelligence. Another important rule is 
that a document is to be construed as a whole, making all the 
terms effective if it can be done. If this is not possible, those 
terms inconsistent with the real intention of the parties wiU be 
rejected. 

82. Important engineering contracts with their plans and 

specifications are frequently voluminous, and often several persons 

have been engaged in preparing them. Hence it will not be 

strange if inconsistencies or contradictions of greater or less 

degree appear, especially as the whole may be assembled in its 

final form somewhat hurriedly. Suppose there is a direct conflict 

in the plans or specifications with some part of the contract (i.e. 

the '' general provisions ") and this discrepancy relates to a really 

important matter. Which shall prevail? Again we must revert 

to the principle, '' The real intention of the parties must prevail." 

It is plain that if the two inconsistent statements are the only 

evidence available, there is a deadlock, and each nullifies the 

other. But there generally will be other evidence of the intention 

of the parties to which due weight must be given. The conduct 

of the parties will be a highly important fact, because if they 

did so and so, either before or after signing the contract, this 

shows in a very practical fashion what they understood or believed 

it meant. 

Suppose in a piece of railroad grading the "contract" stated that the 
borrow should on no section exceed a certain amount. But on the plan of 
the located line, there were shown frequent borrows in excess of this amount. 
As the work proceeds the resident engineer gives all necessarj^ directions for 
each borrow-pit and the contractor performs the work without making any 
objection. This will preclude him from demanding a literal interpretation of 
the language, since there is plenty of evidence that the "real intention" was 
to make the borrows of whatever amount and location the engineer directed. 

83. RELATIVE IMPORTANCE of the PARTS. — With 
regard to the weight to be given different parts of the document, 
in case of contradiction, generally the contract (as distinguished 
from the specifications) is likely to be regarded as the dominant 
part of the instrument. It is probably true that more care and 

45 



§84 CONTRACTS 

diligence will have been exercised in its preparation, its execu- 
tion with legal formahties by the real parties, instead of by their 
agents, etc., all tending to the same result. Another reason why 
the contract is often considered as having more weight than the 
specifications is that the latter are more frequently changed 
as the work progresses and new developments arise. Every 
engineer is very familiar with this fact. It is a general rule, to 
be noted here, that in case of conflict between written and printed 
parts, those written will have precedence. 

It should be clearly understood, however, that there is no 
fixed rule as to relative weights of the parts, for the only invariable 
one, in case of disputes, is that the courts must exhaust every 
legitimate means to ascertain what the real intention of the parties 
was, and then construe the language of the contract in accordance 
with it. The *' intention " thus found will sufficiently indicate 
which of two conflicting provisions is to be thrown out. 

84. Argument. — The foregoing matter tends to establish 
this proposition: The whole aim of our study of contracts lies 
essentially in the accomplishment of two things: First, to make 
the stipulations in the contract of the necessary completeness, 
i.e. to cover aU present conditions as well as all probable future 
contingencies, fully delineating the respective rights and duties 
of the parties thereunder. Second, to couch the intentions in 
clear and unmistakable language, free from inconsistencies or 
ambiguities, so that the only meaning which can be put upon the 
phraseology used is in fact just what the parties intended. 

It thus appears that the whole matter of construing a contract 
is a vital one, and that it has a direct bearing upon the usefulness 
of the contract. A study of how the courts have passed upon 
specific contracts in the past forms the best guide to what they 
would probably decide upon the terms of a given contract. This 
is the mode of studying law known as the case system. 

Illustration: Judicial Interpretation of "Satisfaction." Take, for in- 
stance, the provision "the work shall strictly conform to the specifications, 
and shall be to the satisfaction of the owner. " Can the owner arbitrarily put 
great hardship on the contractor, and cause him either great loss in money 
or in reputation by refusing to be satisfied, even though the specifications are 
substantially complied with? No, plainly this would open a way to injustice 
and fraud which the law will not tolerate. And even though the terms of the 
original agreement have not been satisfied, — since the contractor was to 
work until the owner was satisfied, — if a reasonable man would say that the 
owner had refused to be satisfied when he ought reasonably to be so, then at 
least that part of the contract will be considered to be abrogated and set 

46 



CONTRACT PRINCIPLES §87 

aside. And furthermore, the contractor might be allowed to recover upon an 
implied contract for the fair value of the work done. 

85. CUSTOM AND USAGE. — In writing a contract it 
will frequently happen that by oversight some provisions for 
obtaining a particular result, or obligation to be assumed if some 
important event comes to pass, will be omitted. Suppose now 
the event happens. Are the parties wholly adrift? Is each at 
the mercy of the other who may take advantage of his unpro- 
tected position? No, as the intention of the parties has not 
been fully expressed (possibly for the reason that they did not 
themselves know in advance what they wanted), recourse is had 
to the legal doctrine known as " Custom and Usage." 

When we consider that the common law is, in its essence, but 
the crystallized expression of custom and usage, solidified through 
centuries of application to the tangled affairs of humanity, and 
that these usages are based upon justice, reason, and sound public 
policy, then the wisdom of such a course becomes at once apparent. 
There is a well-worn rule that in developing the meaning and 
powers of a contract, there is as much implied as expressed. In 
other words, it is often necessary to read between the lines, even 
in a legal document. Since it is further apparent that it is always 
literally impossible to say in the instrument everything that 
might be said, what is said must still to a greater or less extent 
be interpreted in terms of custom and usage. In a word, it is 
custom and usage that makes the bare and often harsh rules of 
the common law workable at all. 

86. In contract law it is well established that a contract 
cannot be construed in the light of custom and usage unless such 
custom be definite, uniform, notorious, and universal, so that it 
may be safely presumed that the parties contracted with refer- 
ence to it. This indicates that the plea is not to be resorted to 
on every slightest pretext, and is not to be treated as a cure-all 
for every piece of carelessness (or laziness) on the part of contract 
writers. The weapon selected may prove to be a two-edged 
sword, by no means easily manipulated to the desired end. 

87. It should be obvious that the usage claimed must not be 
contrary to the express terms used, nor can a usage anywise 
illegal be claimed. The word '' universal," as used above, evi- 
dently does not mean that a custom must be even State-wide, but 
that it must be generally recognized over a considerable area. 

47 



§88 CONTRACTS 

The question will thus arise, sometimes, whether the usages of 
one place or of another shall be followed, in case of ambiguity in 
the contract. The principle seems to be that if the parties have 
the same residence, usage of that place controls a contract drawn 
there, such usage being naturally in their minds. If the contract 
be made by letter, the usage of the place where the party lives 
who first referred to it (by implication) will control. If the con- 
tract is to be performed in a certain place, it will be construed as 
referring to the usage of that place. (For an elaborate discussion 
of Custom and Usage, giving many engineering illustrations, see 
Wait, Eng. & Arch. Jurisp. Sees. 620-9.) 

88. CONFLICT OF LAWS. — In these days it is very common 
for important engineering contracts to be entered into by citizens 
of different jurisdictions, or for them to be performed at a place 
other than the domiciliary State of either party. A perplexing 
phase of construing the contracts thus made is summed up in the 
question, '' What law governs?" The difficulty arises principally 
because the States of the Union are independent and sovereign, 
and the limits of their law-making powers are only found in the 
constitutional powers granted' exclusively to Congress. Thus, 
while it is true that the common law essentials to forming a valid 
contract are everywhere the same, yet the enforcement of rights, 
duties, and privileges under them is a subject about which many 
conflicting laws have been made. Hence our question. The 
law books agree that this subject, " Conflict of Laws," is of wide 
extent, involves many exceedingly difficult questions, is much 
unsettled and, on the whole, is one of the hardest and least satis- 
factory of legal subjects to study. A few general rules only will 
be attempted here. We shall observe, as we proceed, that the 
question of conflict of laws is but an advanced stage of the dis- 
cussion of custom and usage. In the one case it is the unwritten 
law, and in the other it is statutory law that is sought to be 
applied. Probably less difficulty will be encountered in applying 
the rules of the common law than when dealing with the statutes.* 

89. Lex loci contractus (meaning, law of the place of contract- 
ing) is a familiar legal phrase in connection with which the Supreme 
Court says: " The general rule is that contracts, as to their nature, 
validity, and interpretation, are to be governed by the law of 
the place where made, unless the contracting parties clearly 

* See Appendix Note 6. "Statutory Regulations Encountered," etc. 

48 



CONTRACT PRINCIPLES §91 

appear to have had some other law in view." (129 U. S. 397.) 
This is plain language from high authority; the difficulty often 
lies in telling just where a contract is made. Where correspond- 
ence results in a contract, the rule is that the offer ripens into 
a contract the moment it is accepted, and hence it is logical to 
say that the contract is made where it is accepted. Thus in a case 
where a contract made with a drummer required ratification by 
his employer, the contract was deemed to have been made where 
the ratification was given. (20 Fed. Rep. 357.) (See also Offer 
and Acceptance § 60.) 

If the parties do not designate any place of performance for 
the contract it is governed by the law of the place where it is 
made. (84 N. Y. 367.) But this rarely applies to construction 
contracts, since in them it is carefully stated just where the 
work is to be carried out, where the parties reside, etc. 

90. It has been repeatedly held that the law of the place 
which the parties intended should govern; but as this lops off a 
very large piece of the general rule of lex loci contractus, the cases 
exhibit many distinctions and jarring decisions at t^is point. 
An important exception to this rule should also be noted with 
reference to contracts for the sale of real estate or immovable 
property; here the rule is lex loci rei sitae, that is, the contract 
is subject to the law of the place where the land or thing is situ- 
ated. This last rule is of especial importance, also, in the transfer 
of land by deed or will. A will is not a contract, however. 

91. The question, " What law governs?" takes on a new form 
when the existence of the contract is not in question but other 
jurisdictions are involved in carrying it into effect, as when 
recourse must be had to law to secure its enforcement. The 
assistance of a court must be sought and given in an orderly and 
systematic way, by and to all within its jurisdiction, for if its 
regular procedure for transacting business is not observed, con- 
fusion must ensue, and the public welfare suffer. Hence in 
whatever relates to securing a remedy for a breach of the con- 
tract, or to obtaining its enforcement, one must be governed 
by the lex fori (the law of the forum, that is, the place where the 
remedy is sought to be applied). This lex fori regulates every 
step of legal process, controls the admission of evidence, pre- 
scribes the methods by which the contract shall be proved, etc., 
etc. 

49 



§ 92 CONTRACTS 

The principal point of the discussion may be summarized in 
the famihar rule: '' A contract that is valid and binding where 
made is valid and binding everywhere; and if void or illegal where 
made, it is generally held to be void and illegal everywhere else." 
(Amer. & Eng. Cyclop. Law.) But the same authority indicates 
that the opposite result may be reached if the contract is contrary 
to sound morals, or repugnant to public policy, — as would be 
expected. 

92. ENGINEER ENFORCES CONTRACT. — As a practical 
phase of construing contracts, it is probably true that in the 
majority of cases where something is being built, the engineer 
is the person most called upon to construe and interpret the con- 
tract, and particularly the specifications. Therefore it will not 
be inappropriate to comment upon '^ Duties of Engineers in En- 
forcing Contracts." Mr. A. J. Himes, writing in Eng. News, 
July 17, 1902, handles this topic in a refreshing manner, and his 
words may well be pondered by the engineering student. 

He says, "Some engineers claim it is inadmissible to pry into the con- 
tractor's affairs, or to exhibit suspicion of his work, for such treatment will 
drive any man to crime." Then he adds, "But the engineer who takes such 
a view of the matter wTites himself as unfitted to take responsible charge of 
work. Such a man would not ask for competitive bids for merchandise, as 
required in government affairs, as such a course would imply a suspicion 
that the first merchant consulted was unfair; he would not ask for a receipt 
for money paid, as that would imply a suspicion that the payee would later 
deny payment. In short, such a man has too sensitive a nature to do busi- 
ness. He ought to play golf. * * * * It is never dishonorable to ask a man 
to perform his contract, and no reputable contractor will refuse to do so if it 
is insisted upon. The production of bills of materials, and receipts of payments 
of claims that may become liens on the work are ordinary safeguards, and in 
no sense a persecution nor an insult." 

DISCHARGE OF CONTRACTS 

93. We have previously considered how and when a valid 
contract is made, and noted certain of the obligations arising 
thereunder. Let us now consider how its existence may be 
terminated, that is, how the contract may be discharged. When 
it is accomplished, the contractual tie is loosened, the parties are 
wholly discharged and freed from their liabilities, and are equally 
deprived of their rights or privileges under the contract. The 
subject of discharge is a highly important and practical matter 
for the engineer, for while it appears that the waj^s in which a 
contract can be made are relatively few, yet the events which 
may work a discharge of the contract are at least a dozen in 

50 



CONTRACT PRINCIPLES §95 

number, and moreover, some events of the list may be accom- 
plished with the principal parties in interest remaining wholly 
unaware of the fact. A diagram illustrating the principal head- 
ings to be treated under discharge, together with some of their 
principal subdivisions or related subjects, will be found at the end 
of this chapter. 

94. PERFORMANCE. — Probably the foremost method of 

discharging a contract is by the 
parties fully performing its requirements, and this, in fact, is the 
almost universal purpose for which a contract is ordinarily 
entered into. Within this heading are embraced all legitimate 
means of fulfilling the terms of the agreement. As performance 
may be termed the normal way of discharging the contract, the 
leading question merely is: " Have the terms been substantially 
complied with?" The issue of substantial performance is some- 
what involved with " severable " or " separable " contracts, with 
recovery upon a " quanttifn meruit, ^^ and also with what is meant 
by " specific performance," and what happens if it turns out to 
be a case of '' impossible performance." It will be in order, 
therefore, to correlate in sequence these varying aspects of '^ per- 
formance." 

95. SPECIFIC PERFORMANCE. — It is historically true 
that the doctrines of equitable jurisprudence grew up in the 
attempt to soften the harshness and asperities of the common 
law; for the latter was generally unyielding, severe, and made 
no allowance for the particular mitigating circumstances of a 
given case. And it is probably true that many times strict 
moral justice does miscarry through the operation of the common 
law. The more flexible equity system, often relying more upon the 
abstract principles of equity and following the dictates of '' good 
conscience," would perhaps have produced quite different results. 
The historical development of the two parallel branches of juris- 
prudence known as '^ law " and '' equity " need not now concern 
us, nor is it to be understood that whenever there is a particular 
hardship in law relative to the enforcement of contracts, for 
example, that equity will step in to relieve it. In fact, though 
law and equity exist concurrently, each occupies a fairly definite 
field, and in only a few instances do they overlap. The principles 
of equity jurisprudence are often simply stated in the form of 
maxims though the intricacies to be followed in the development 

51 



§ 96 CONTRACTS 

of these maxims are far from simple, and will not be ventured upon 
here, for equity touches engineering contracts but rarely. 

96. To get at the title " Specific Performance of Contracts," 
however, we must examine that maxim which most defines the 
outhnes of equitable powers, viz. : " Equity will not interfere nor 
take jurisdiction where there is an adequate, complete, and plain 
remedy at law." Now with reference to contracts, the theory 
of the common law is, ''I may make a contract but I don't have 
to carry it out, since, if I choose, I may instead pay damages 
occasioned by my failing to carry it out." This doctrine is well 
settled, and hence leaves it optional with either party to a contract 
whether he will carry out the terms, or pay damages for the 
breach of them. 

In contradistinction to the legal theory just set forth stands 
the equitable one of specific performance. The phrase means 
the right to have the agreement carried out specifically, that is, 
to the very letter. 

Illustration: Suppose a contractor who is building a bridge finds himself 
losing money, and decides to quit work, though he is willing to pa}' legal dam- 
ages for having failed to perform. If specific performance could be invoked then 
he would have to carry out the exact terms of the contract, and no excuse 
would be accepted. It is probable, however, that in nearly all engineering 
contracts a court of equity would refuse to interfere, but would say, "Damages 
will make you whole, that is, repair all your losses. Therefore you have an 
adequate and complete remedy at law, and specific performance will not be 
granted." 

96. There is, however, a certain type of contracts (not gen- 
erally met in engineering) in which specific performance is usually 
granted. Instances are contracts for the sale of land, and in 
respect to the sale of rare or valuable articles which are unique 
and cannot be otherwise obtained, and in certain cases where 
damages are of doubtful extent, or impossible to be fully ascer- 
tained. The test seems to be, " Was the act to be done, or the 
thing contracted for of some peculiar and extraordinary value 
to the party suing?" If it was, the party may get specific per- 
formance, otherwise not. 

Examples: A contract for the sale of coal tar which was absolutely neces- 
sary to the plaintiff's business wa^ ordered to be specifically performed by 
the court of equity, because the defendant had a local monopoly in this 
material. An engineer propounds this for another illustrative question: If 
the owner of exclusive rights, such as Simplex Piles, Hydrex Waterproofing, 
etc., refused to carry out his agreement to use and apply such patented article, 
could specific performance be claimed? Or would damages be given on the 
ground that there are other methods of pile driving or waterproofing which 
would serve as well? 

52 



CONTRACT PRINCIPLES §99 

97. TENDER OF PERFORMANCE. — A contract will 
sometimes be discharged by a tender of performance. By this 
is meant the formal and unconditional offer to fulfill his ob- 
ligation made by one of the parties. In case of money payments, 
the offer must be absolute and unfettered by any conditions, as 
for example, the party paying cannot demand a discharge (though 
it would seem that he should be entitled to at least a receipt), and 
the tender must be of the entire amount due. (5 Mass. 365.) 
When there are concurrent acts to be performed neither party 
can charge the other with a breach of the terms without having 
tendered performance himself, and then showing that the other 
party prevented him from performing, or else expressly waived 
his rights. (55 N. Y. 480.) This may happen in engineering 
contracts where the owner prevents the contractor from doing 
the work, as by his failure to secure possession of the site which 
the contractor must occupy, or getting necessary building per- 
mits, etc., etc. The effect is to release the contractor and to 
render the owner liable in a suit for damages. 

98. IMPOSSIBLE PERFORMANCE. — As considerable dis- 
cussion has already been given this topic in connection with 
'' Impossible Consideration," the student or reader is referred to 
Sees. 45-6-7, which should be read again in this connection. 

99. SUBSTANTIAL PERFORMANCE. — The phrase '' sub- 
stantial performance " raises an issue at times of considerable 
difficulty, involved in determining the rights of the parties under 
a contract for building something. The student is cautioned at 
the outset that the phrase has a distinct technical meaning sup- 
plemental to the ordinary significance of the words. We shall 
now attempt to define the technical meaning, though the fact of 
substantial performance is always established by a construction 
which the Court judicially places upon the contractor's acts after 
weighing all the evidence surrounding them. It may well be 
mentioned here that '^ substantial performance " is a doctrine 
borrowed from equity, designed to render fraud or unjust enrich- 
ment more difficult. 

Most engineering contracts embrace several distinct stages 
or parts of erection, and the question arises whether in fact all 
their terms have been fully carried out. Logically, the situation is 
simple enough, for the contract is either performed, and the 
contractor entitled to his pay ; or it is not performed and he is not 

53 



§100 CONTRACTS 

entitled to it. Yet in a large number of cases a rigid adherence 
to this rule would inflict great injustice. For example, if the 
contractor has acted honestly, really intending to do his work 
completely and properly, but has failed in some comparatively 
unimportant particulars, the owner should not be allowed to 
receive the benefits of practical completion without paying a fair 
compensation for the part done. The owner should, however, 
be allowed to deduct suitable credit for the incompleted part, or 
for the loss or inconvenience suffered on account of it. 

100. The key to the situation, therefore, lies in deciding upon 
the relative importance of the parts done and undone. While 
any fair-minded person ought to be able to settle with consider- 
able accuracy whether or not the contract has been substantially 
performed, yet as the question is often of vital importance to one 
of the parties, it may require the combined acumen of judge, jury, 
and counsel to answer the question. 

Let us suppose a case where the contractor admits he has not 

ftdly performed, and possibly he does not even claim substantial 

performance, yet his work is of great benefit to the owner; can 

the contractor recoup himself for the detriment he has suffered, 

i.e. the expense he has been put to? Yes, here again, the law will 

imply another contract to take the place of the one admittedly 

broken, by means of which he can recover the amount the work 

has actually cost him upon proving satisfactorily to the court 

what that amount is. In legal terminology, he is said to have 

recovered upon a quantum meruit, which is quaintly interpreted 

to mean " as much as the party deserved." (173 Mass. 1.) 

In a case such as we have just been discussing, it appears that the con- 
tractor can do either of two things, according to the situation he must face. 
If he took the contract too low, is losing money, and is in some way pre- 
vented from completing a sufficient amount of the work to fairly raise the 
question of substantial performance, he will be wise to waive the original con- 
tract and to sue on quantum meruit, provided he feels confident that there is 
satisfactory proof of what the w^ork has really cost him. But on the other 
hand, if the contract was favorable to him, he will then be better off financially 
to claim substantial performance, though he must, of course, stand ready to 
deduct the value of that part admittedly not done from the total sum. 

As said before, the doctrine of substantial performance is an 

equitable one, and includes compensation (to the owner) for all 

defects which are not so slight and insignificant as to be safely 

overlooked. (163 N. Y. 220.) 

101. SEVERABLE CONTRACTS. — The issue of ''sub- 
stantial performance '. requires us to consider for a moment the 

54 



CONTRACT PRINCIPLES §103 

status of " severable " or " separable " contracts. Some con- 
tracts from the nature of their subject matter very easily allow 
the question to be fairly asked whether, though a unit in general 
appearance, they are still not capable of separation into several 
constituent parts. 

Suppose, for example, that having considerable money which I wish to 
put into real estate, I contract with X, a builder, for him to build me three 
houses at $5,000 each. Suppose, however, that after one is completed I 
decide that I am not fully satisfied with his work, and refuse to allow him to 
begin the others, but tender him the $5,000 due on the first house. Can he 
refuse to accept it, and hold me to the agreement by which he was to build 
all three? If the contract is divisible, in fact, then the consideration is also 
divisible, and I am acting within my rights. 

It seems probable that in such a case the contract would be 
admitted to be separable in its essence, but the student is warned 
that there is a considerable diversity of opinion among the Courts 
upon this point, a type of contract by one held to be entire may 
by another be held separable and divisible. Thus it is ordinarily 
held that a building contract (for a single building) is entire and 
not severable. The contractor undertakes the work as one and 
not several jobs, even though there are several distinct stages to 
the work. The point is that until he can show completion of the 
work he cannot demand payment of the contract price. But, of 
course, the contract may be so worded that there are in reality 
distinct and separate pieces of work, with separate considerations 
therefor, but substantial performance is a condition precedent to 
the contractor's right to recover. 

102. It has been stated by high authority that '' the equitable 
doctrine of substantial performance is intended for the protection 
and relief of those who have honestly and faithfully endeavored 
to perform their contracts in all material particulars, so that their 
right to compensation may not be forfeited by reason of mere 
technical, inadvertent, or unimportant omissions or defects. It 
is incumbent upon him who invokes this doctrine, therefore, to 
present a case where there has been no wilful omission or depart- 
ure from the terms of the contract." (123 Pa. 19.) 

103. SUMMARY of '^ PERFORMANCE." — If a contract 
is fully performed, then, as its object has been attained, the con- 
tractual rights are discharged and the contract passes out of 
existence. This may be termed the normal and foremost mode 
of discharge. Suppose, however, one of the parties is wholly 
unwiUing to carry out his agreement. In a limited class of 

55 



§ 104 CONTRACTS 

cases, '' specific performance " will be enforced by a court of 
equity, when, the performance having been obtained, the contract 
is discharged as before. 

Let us next suppose that events have arisen subsequent to 
making the contract which make performance a physical impos- 
sibility. If the events fall within the category covered by " failure 
of consideration " there is no discharge because there never was 
a contract. But we have seen that if the thing to be done sub- 
sequently becomes extremely difficult, i.e. only " next to im- 
possible," and if the contract is unconditional in its terms, then 
it is not discharged until either the thing is done or damages paid 
for the injury or loss suffered by reason of its not being done. 
Thus under certain conditions impossibility of performance is a 
sufficient excuse, the contract is discharged, and the right to 
damages does not accrue. 

104. The issue of '' substantial performance " arises when one 
party claims he has performed with " practical " completeness, 
and that he is therefore entitled to receive pay, if not for the whole 
job, at least for the part which he has done, and that this should 
be at the contract-rate of pay. The other party is contending 
that as the contract is not severable into parts, it has not been 
fully performed, and therefore no pay should be given until the 
whole is completed. If the court finds the equitable doctrine 
of " substantial performance " applicable, and so awards its judg- 
ment, then the contract is discharged. But if the court does not 
find that the terms of the express contract have been sufficiently 
complied with to warrant such an award (to receive which would 
imply a payment of substantially the whole of the contract price), 
it may still prevent the other party from being unjustly enriched 
at the contractor's expense by declaring that there is an implied 
contract, and thus allowing recover}^ upon a quantum meruit. 
In either of the last mentioned cases recovery by the contractor 
discharges the contract and precludes further action under it. 

105. DISCHARGE BY AGREEMENT. — While the contract 
is still unperformed, either wholly or in part, it may be discharged 
by agreement and abandoned, since the parties have, in general, 
the same right to unmake that they had to make the contract. 
Such an agreement may be witnessed by acts as well as by words. 
But there must be a real meeting of the minds for this also, and 
if there has been partial performance, and the contractor has 

56 



CONTRACT PRINCIPLES §107 

expended a considerable sum of money, there must be a substan- 
tial consideration for his agreement to waive his rights under the 
contract; for otherwise, the contract is still in full force and bind- 
ing upon the other party. It is to be noticed, too, that if some 
outside party becomes involved in the contract, by reason of which 
his rights would be greatly prejudiced by an agreement to termi- 
nate between the original parties, then they may not be able so to 
terminate. Generally, where one party chooses to renounce a 
contract, the other party may agree thereto and waive his rights, 
as already stated, or he may elect to keep the contract in force, 
and to hold the other party to his obligation. Then, even though 
he may not be able to make the other party perform, he may 
yet get damages by reason of the failure to perform. 

106. In accord with the above statement that the parties 
can unmake as well as make their contracts, it is obvious that 
they may qualify or modify the terms of the old agreement, or 
substitute another therefor. The new one may express or imply 
an annulment of the old by exhibiting terms plainly inconsistent 
with it. And of course, if the parties agree upon it in advance, 
there may be a special provision in the contract providing a mode 
of alteration, modification, or for its own discharge. For instance, 
they may state that unless such and such a condition precedent is 
brought to pass, or upon the happening of a certain event — a 
''condition subsequent'' (see §§71-3), or at the option of the 
other party, to be manifested in a particular way, etc., then and 
thereupon, the contract shall terminate, be null and void, and of 
no effect. 

Such provisions are termed '' cancellation and abrogation '' 
clauses, because they provide a way of discharging the contract 
other than by performance. Familiar instances are: Insertion 
of " strike clauses,'' in contracts to furnish materials ; providing 
that the contractor shall not be liable as upon a breach, in case 
of delay by a common carrier when the other terms make 
" time of the essence " of the contract ; etc. 

107. Our title seems also to include DISCHARGE by WAIVER. 
The word " waive " is defined as meaning to relinquish or to 
abandon one's rights or claims. It is apparent, therefore, if the 
parties mutually waive their rights, then the contract is discharged ; 
but let it be distinctly noted that one cannot " waive " his duties 
or responsibihties. As previously said, to annul or abandon a 

57 



§108 CONTRACTS 

contract requires the same consent as did the making of it, and 
there must be a real meeting of the minds. (115 U. S. 29.) A 
written contract not yet performed may be rescinded or aban- 
doned by parol (i.e. orally) ; and also the agreement to rescind 
may be inferred from the acts and declarations of the parties, but 
such acts must be clear and unequivocal. (94 Mo. 388.) 

In this connection Mr. Wait points out that it will be necessary 
for the engineer to guard his acts carefully when directing con- 
struction work done under contract, lest, as the agent of the 
owner, he unintentionally " waives ^' his employer's rights. If 
such waiver occurs the result may be that the " independent 
contractor " (see § 172) status may be set aside, and that of 
" master and servant " substituted. The importance of this dis- 
tinction will be more fully developed in the next chapter. 

The mutual agreements to rescind and waive respective 
rights are held to be a sufficient consideration to support the new 
bargain, i.e. the agreement to release one another. Summarizing, 
it may be said that when the parties agree to rescind and to give 
up the rights which the contract confers upon them, the contract 
is " discharged by waiver." 

108. ACCORD and SATISFACTION. — When the parties 
stand in the position of debtor and creditor, a contract is some- 
times discharged by " accord and satisfaction," meaning that 
the creditor agrees to accept some other thing in lieu of that which 
is contracted for. The agreement upon which the one party 
is to be satisfied is called an " accord," and when the thing 
promised has been performed or paid, the whole transaction con- 
stitutes an " accord and satisfaction." Space does not permit 
considering this matter fully here, but it should be noted that an 
agreement to accept less than the whole sum which is due as a 
debt cannot be made an accord for the whole amount. (27 Me. 
362.) The student will recognize that this sort of a case has 
already been treated under " Consideration," and that the present 
difficulty is, as was stated there, one sum of money cannot at the 
same moment be a consideration for two different contracts. 

But the rule just stated does not apply where the amount of 
the claim is unliquidated and payment is made by way of com- 
promise, or settlement. Nor does it apply where a number of 
creditors make a " composition " agreement with their debtor, if 
he carries said agreement into effect. (142 N. Y. 404.) 

58 



CONTRACT PRINCIPLES §111 

109. ALTERATIONS. — In discussing engineering contracts 

the subject of " alterations " is a 
highly important matter, since changes in both plans and speci- 
fications are not uncommon. The obviously practical way of 
dealing with " alterations " is to make suitable provisions for 
change in the contract itself, and then to comply with them 
strictly when changes become necessary. If approached in this 
way it is held that changes in the contract will not operate to 
annul the original agreement, unless such was the plain intention 
of the parties. If changes of any importance are made on the 
original document, it should be re-dated and re-executed (i.e. 
signed by both parties), with careful reference made to the 
changes. (See § 112, also.) 

110. QUESTION OF CONSIDERATION. — It has been 
repeatedly stated that a contract is to be taken as stating the 
intention of the parties. Conversely, so long as their intentions 
are lawful the parties are at liberty to express them in the con- 
tract, and such intentions can be enforced. Accordingly, it has 
been held that the parties may properly provide in the contract 
that changes in the materials or methods shall be allowed " with- 
out further consideration." 

There seems to be no injustice in this, and upon giving a little thought 
the student will see that this rule is not incompatible with the argument pre- 
viously given (see § 30) to the effect that it is impossible for the same con- 
sideration to serve as the basis of two independent contracts. In the former 
case the situation was that the contractor w^as attempting to force the situa- 
tion against the will of the owner after the contract was made. In the present 
case, the parties by mutual consent before entering into the bargain agree 
and specify that under certain conditions contemplated in advance, a change, 
i.e., a new promise, may be made. And at the same time they further agree 
that the original consideration shall serve in the sec<ind agreement also. It is 
hoped that the distinction will be apparent. 

As a corollary to this principle, it is just and reasonable, 
therefore, that changes so made must be in harmony with the true 
intention of the parties, and that inconsistent changes, or such 
ones as would work great hardship or injustice on either party, 
will not be allow^ed. 

111. Let us next suppose a case where the language used in 
the contract does not sufficiently express or imply the waiver of 
a new consideration, in case changes or alterations are subse- 
quently made. In brief, the situation is that though the con- 
tractor may promise to make changes, as, for example, do more 
costly or a higher grade of work, yet a breach of this promise 

59 



§112 



CONTRACTS 



cannot be made the cause of a suit for damages unless there is a 
sufficient new consideration. 

This new consideration may consist of the addition or deduc- 
tion of a certain sum from the stipulated price, according as the 
change called for a greater or less amount of work. If no such 
consideration exists, then the party to be bound is at liberty to 
change his mind. 

112. DISCHARGE by ALTERATION. — The foregoing 
discussion has point because of the general principle that a 
material alteration of a contract operates as a discharge. In this 
connection the difference between an alteration and a true supple- 
mental contract may need to be observed. If extensive additions 
are made to the contract they may well be called a supplementary 
agreement, but if nothing is added and one provision merely 
supersedes another, it would probably be deemed an alteration. 
The necessity of a new consideration to support a new promise 
(if it is really a supplemental contract) has been already shown. 
(See § 39.) 

Sealed Instruments. — The question of discharge now under 
discussion is somewhat involved with the technical rules regard- 
ing seals. It is said that a written contract not required by law 
to be under seal may be modified or altered by either oral or 
written agreement ; that is, the seal is superfluous in such a case. 
But where the seal is required by law, the alterations must also 
be under seal. With reference to engineering contracts, it is 
probably a general rule to make them under seal whether or not 
required by law at the place of their formation. The old theory 
of the law with respect to the relation between a seal and con- 
sideration has been already alluded to (§ 49), and need not be 
further treated here save to say again that the ancient distinc- 
tion between sealed and unsealed instruments has been largely 
abohshed. 

1 13. SUPPLEMENTAL CONTRACTS. — In connection with 
'' Alterations," Mr. Wait offers a very helpful suggestion to the 
effect that it is good practice when material alterations or addi- 
tions to a contract are to be made, or serious omissions are to be 
supplied, that these should be plainly treated in a supplemental 
contract formally executed by the parties. The effect upon the 
original contract will then be clear and unmistakable. To the 
same end, though securing it in a less formal manner, are the pro- 

60 



CONTRACT PRINCIPLES §116 

visions frequently used in engineering contracts, to the effect 
that no claims for " extras ^' shall be made or considered unless 
they have been authorized and directed in writing by the engineer, 
etc. 

Another way of working out the same result is to consider that 
the said writing constitutes a very practical '' construing " which 
the parties have themselves put upon the contract. The courts 
will be bound to give such weight to the interpretation so made 
as will make it an integral part of the original contract. And 
this is all that is sought for in any event. 

114. '' EXTRAS. —As a phase of " Alterations " the topic 
of " extras " merits careful study and painstaking attention from 
every engineer concerned with contract work, whether in drafting 
the instrument or erecting the structure. Mr. Wait well says, 
'' Extras are the contractor's aim and the owner's fear." The 
term is used to mean additional work which was not foreseen or 
contemplated when the contract was executed, or which though 
highly necessary to the main scheme of construction was over- 
looked and not provided for in drafting the contract. 

115. When the need for extra work arises, in the majority 
of cases the contractor will be the only person in position to per- 
form it, either because he is so occupying the site as to prevent 
another contractor from working — if another were available — 
or else because there is in fact no other one within reach of the 
owner, etc. The effect is that the contractor controls the situa- 
tion because the extra work must be done, and he is the only one 
who can possibly do it, — therefore he sets his own price upon 
his labor. That it is often exorbitant to the last degree is an 
undoubted fact which illustrates a common attribute of human 
nature. Indeed, it is credibly stated that many contractors com- 
pete sharply for work, bidding only the real cost, anticipating that 
the extras at handsome prices will afford them a good profit on 
the whole job. For this reason it is common to find the most 
drastic provisions inserted in the contract looking to the avoidance 
of extras. It seems only common fairness, however, to provide 
and to insist that extras must be ordered in writing, and that a 
monthly account and claim for the same must be turned in, etc. 

116. It is ordinarily provided that all the work shall be 
erected in accordance with the contract drawings and specifica- 
tions, and also in accordance with such further drawings, details, 

61 



§117 



CONTRACTS 



instructions, directions and explanations as may from time to 
time be ordered by the engineer. It will be seen at once that 
these provisions are usually necessary, since it cannot possibly 
be told in advance just what details will need elaboration and 
further explanation, even if it is true that the major details are 
wholly formulated on the contract plans, — which is frequently 
not the case. 

Upon receiving these additional plans or instructions the con- 
tractor may fairly and in good faith ask if the required work is not 
plainly in excess of that first contemplated. It is also apparent 
that even with abundant good faith on both sides there may yet 
be honest differences of opinion. To make the engineer sole referee 
in such a case, with power to decide arbitrarily and summarily 
as to what constitutes an " extra " is to invite friction. But if 
it is provided that upon receiving such further plans and descrip- 
tions the contractor is of opinion that they are extras, and that 
he shall before proceeding with such work give the engineer notice 
in writing to this effect, and upon being requested to proceed 
by the engineer shall do so, if then they fail of an agreement as to 
whether it is extra work, recourse shall be had to arbitration, — 
such a plan it seems, might be a preventive of trouble. This 
suggestion is taken from the best English practice. (Bamford, 
Proc. Am. Soc. C. E., XXXV, 1328.) 

117. ARGUMENT FOR DEFINITENESS. — What has been 
said heretofore gives point to the statement that engineering speci- 
fications should state with all possible exactness and detail the 
precise limitations of the work to be done, as for example, what 
depth of foundations is really in contemplation ; what the minimum 
output of power for an electrical machine must be, etc., etc. 
When the work is carefully delimited there can be no reasonable 
question as to what is covered by the contract, and, therefore, 
what may justly be claimed to be extras. Failure to do this 
causes endless controversies between owner and contractor as to 
what is or is not additional work, since the natural tendency of 
the contractor to pare down the scope of the original contract 
may always be noted. 

118. Mr. Wait observes that extra work is one of the chief 
sources of litigation between owners and contractors. It is 
usually because the work to be done was not properly described ; 
or it may happen through the pride of the designer or engineer 

62 



CONTRACT PRINCIPLES §120 

who is not willing to admit that he overlooked the cost of certain 
important items of labor or materials required; or because mis- 
takes were made in alignment or grade in staking out the work ; 
or an inspector erred in his judgment, etc., etc. 

Since the engineer should be actuated by at least an ordinary 
sense of decency and justice toward the contractor who may 
undertake the work, Mr. Wait recommends that provisions for 
extra or additional work should be drawn with extreme care, and 
only after the specifications have been prepared, revised, and 
reviewed, and after the engineer is satisfied that he has fully 
described all the work contemplated by the contract. 

119. PRACTICAL SUGGESTIONS on EXTRAS and 

PAYMENTS. — The following is a satisfactory way of providing 

for extras, and for their payments, — matters which easily assume 

such troublesome proportions in lump-sum contracts: 

"The contractor, when authorized by the engineer, shall vary by alter- 
ing, adding to, or deducting from the contract requirements. Such authoriza- 
tion is to be sufficiently proven by any writing or drawing signed by the 
engineer, or by any subsequent written approval of work by him, but no 
variation shall be made without such authorization, nor will compensation 
be allowed unless in accordance with such authorization." (Bamford, Proc. 
Am. Soc. C. E., XXXV, p. 1334.) 

120. As the price to be paid for such extras is a highly impor- 
tant matter, an arrangement for its determination may be made 
in any one of four different ways : 

A. — Price of extras to be fixed by estimate and acceptance of a 
hump Sum, and in case an agreement upon the amount due can- 
not be reached by the engineer and contractor then recourse is 
to be had to arbitration. (The student will see that this is a 
supplemental contract, see § 113.) 

The operation of this scheme will be facilitated if the owner pays a sum 
which he concedes to be a fair price as the work progresses, and which it is 
agreed the contractor may accept without waiving his rights to the full price, 
thus leaving only the difference, or balance, to be adjusted by arbitration. 

B. — Price of extras to be determined by Unit Prices, agreed 

upon when the extra work is undertaken. 

This plan would appear to be unnecessary of adoption unless the extras 
WTre of a different class of work than was covered by the original contract, or 
unless the contract was to do a perfectly definite amount of work at the first- 
named unit prices, when, of course, the parties might make a new agreement 
for any new work (even of the same sort) in excess of the original amount. In 
such a case, the right to have arbitration of unsettled points might still be 
retained. 

C. — Price of extras to be fixed by Net Cost. 

In this case it is well to specify just what items shall be counted in and 

63 



§121 CONTRACTS 

what omitted in determining the net cost, else it is easy to foresee difficulty 
ahead. Proof may be required that the work cost more than the usual prices 
for such work, etc. And finally, this plan requires that it shall be carefully 
stated just what percentage of the total net cost shall be allowed the con- 
tractor as his profit. 

D. — Price of extras fixed by Cost plus a Lump Sum. 

Here a bonus may be introduced if the cost falls below a certain sum"; 
otherwise there is no particular inducement to the contractor to keep costs as 
low as possible. The manner of determining the costs would, of course, have 
to be regulated as before, under C. 

121. DISCHARGE BY PAYMENT. — In a sense parallel 

with discharge by 
performance, is discharge by payment of the amount agreed 
upon in the contract. That this does discharge the contract is 
almost too obvious to need comment here. It may be noted, 
however, that the payment may be a true performance, as being 
the identical thing contemplated by the contract ; or payment 
may indirectly result in performance, as where it is accepted as a 
substitute for performance, as, for example, being accepted in 
satisfaction of a breach of the contract. What will in fact con- 
stitute a payment, as, for instance, whether the acceptance of a 
promissory note is payment or not, is a development of the 
law of Negotiable Instruments, not desirable to be made at this 
point. 

122. BREACH IN GENERAL. — That a person who fails 

to carry out the terms of 
his agreement is guilty of a '' breach,'' and that the other party 
thereby becomes entitled to a suit for damages sustained by 
reason of the breach, is common knowledge. That such a breach 
may or may not discharge the contract, is perhaps not so well 
known. We shall be repaid, therefore, for looking into this 
matter further. 

A breach occurs : 

(1) When a party renounces his liabihty and refuses to per- 
form; 

(2) When by his acts he renders performance impossible ; 

(3) When he merely jails to perform what he agreed to do. 

It should be noted here that if the injured party elects not to 
regard the happening as a substantial breach, but chooses to con- 
tinue the contract in force, then there is no discharge arising by 
the mere act, or failure to act, of which the other party has been 
guilty. There are, therefore, two questions presented: (a) What 

64 



CONTRACT PRINCIPLES §125 

constitutes failure of the promisor to perforra? and (b) When 
does it discharge the promisee? 

123. In answer to question (a) only, it appears that there 
must be a substantial breach of a vital part of the agreement, 
and this, it will be seen, depends upon the true interpretation of 
the contract as a whole."^ As previously indicated, the parties 
can make any lawful intention absolutely essential, even if the 
detail dwelt upon and magnified is apparently a minor one; for 
if they but clearly evidence their intention by the language used, 
the courts are bound to give it effect, since it is not their function 
to make new agreements for the parties. Our question, in fact, 
develops several complexities, which cannot be pursued here, 
such as introducing the distinction between '^ entire " and " sepa- 
rable,'' or " severable," contracts, and becomes involved in the 
question of '^ substantial " performance, wherein, as we have seen, 
a failure in minor details does not discharge the contract. 

What has just been said will illustrate once more the need for 
the contract-writing engineer to look ahead, to study and think 
out carefully what he means and intends, both under existing 
conditions and possible future ones, and then to express the whole 
situation in grammatical and rhetorical form which is unassailable. 

124. BREACH BY CONTRACTOR'S SUSPENDING 
WORK. —(See Bamford, Proc. Am. Soc. C. E., XXXV.) A 

contingency which strikes at the very root of the con- 
struction contract, is a breach arising through a suspension of 
work by the contractor. It is, perhaps, the one thing above all 
others which the owner is desirous shall not happen. Moreover, 
a suspension will ordinarily only happen in the event of serious 
difficulties arising, and the interests involved on both sides are 
usually large financially. Hence it behooves the contract-writer 
to introduce only thoroughly well-considered provisions when 
contemplating the event of a possible suspension of the work by 
the contractor. He should use very especial care to see that his 
provisions are entirely unambiguous, and that the wording is free 
from uncertainties. 

125. In writing the contract, therefore, it will be well to 
define first what degree of suspension (e.g. for a certain specified 
time) is allowable and excusable. Then the engineer should be 
directed to give suitable notice to the contractor when he con- 

* See Appendix Note 7. "Breach by Abandonment." 

65 



§126 



CONTRACTS 



siders the work to be in a state of suspension, calling attention to 
the act or default on the contractor's part upon which the notice 
is based. It is then proper to specify just what the contractor's 
rights shall be in regard to removing any of his plant from the 
site after the notice has been given. 

In extensive building operations it seems not uncommon to provide that 
the owner shall have a lien upon the plant and tools for the next thirty days, 
unless said owner within that time enters upon and takes possession of the 
plant with a view to continuing the work upon his own behalf, charging 
the cost of doing the same against any moneys which may still be due the 
contractor under the terms of the original agreement. 

126. Following this, there may be a clause dealing with the 
owner's rights when he enters upon the site for the purpose of 
completing the work, after breach by suspension on the part of 
the contractor. The student will probably observe that if the 
contractor unjustifiably suspends work this amounts to a sub- 
stantial breach of the written or '' express " contract, and that 
save in so far as he can recover on a quantttm meruit (roughly, 
an implied contract) for the work already done, he need not be 
considered as to the balance of the contract. This is because he 
has broken the written contract in a substantial w^ay, therefore 
it is discharged, and hence as no contract now exists, he has no 
rights under it. Yet even though the real kernel of the matter 
may be stated as above, trouble may be avoided by stipulating 
in advance just what the owner's rights shall be when he makes 
such entry, and this will be particularly true wiien it will be ad- 
vantageous (as it usually is), for the owner to make use of some, 
at least, of the contractor's plant. It is usually provided, there- 
fore, that all materials delivered upon the site which are intended 
for the work shall become the property of the owner, and that he 
shall have a hen upon the plant until the work is completed. Any 
other persons or contractor whom the owner sees fit to employ to 
complete the work may be put into possession of the site by 
him, and the first contractor forthwith excluded, save for the pur- 
pose of measuring the work previously performed by him. 

127. In fairness to both parties, it may be provided that if 
the cost of completion by the new contractors be less than the 
original contract price, then the balance due may be paid to the 
first contractor, but that if the cost of completion should prove 
greater than the contract price, then the first contractor shall be 
bound to pay all excess. 

66 



CONTRACT PRINCIPLES §130 

The above suggestions are taken from the best English practice. Such 
provisions do not offer the contractor much inducement to abandon or seri- 
ously suspend the work, as he is practically bound to see it through anyhow. 
The advantage is that by such provisions the owner has an opportunity to 
control the situation more thoroughly if he has to deal with a seriously non- 
energetic contractor. (See also Appendix Note 7. "Breach by Aban 
donment.") 

128. REMEDIES FOR BREACH. — We have studied at 
some length the phases of discharge by breach, and the practical 
engineer and student may now naturally ask, *' But if the contract 
is discharged, what can be done about it, — what are my rights in 
such a case?" It is well settled that when a contract is discharged 
by breach the injured person has three distinct rights: 

(1) To be exonerated from further performance. This 

appHes to either party. 

For example, let us suppose a contractor was to be paid periodically at 
different stages of the work on a house, so much when the foundation was 
done, another sum when the frame was up and boarded in, another when 
plastered, etc. It is evident that he should not be obliged to proceed to 
shingle and plaster the house if the stipulated sum was not forthcoming when 
the house was boarded in. 

(2) The injured person may sue on qitanttim meruit. (See 
§§ 100-129.) It is quite apparent that he should be entitled to 
sue for the value of work already done. It is evident that this 
rule refers to breach on the part of the owner. 

129. This action of quantum meruit probably deserves a further word in 
passing. Though it is roughly defined as an action upon an implied contract, 
it is more accurately classified as a "quasi-contract." That is to say, a quasi- 
contract is an obligation similar to a contract but which has not arisen in the 
regular manner, and is said to spring from the lawful and voluntary acts of 
the parties in the absence of any agreement. The root-idea is that there shall 
be no unjust enrichment on the part of one party at the expense of the other. 
So in the case just put, the contract was for the whole house with provision 
for payment at stated periods. This contract has been broken, hence the 
parties now stand in a quasi-contractual relation, since they have not carried 
out what was intended. The distinction between quasi-contract and a simple 
implied one, therefore, is that in an implied contract there never was any 
expression of terms to make a contract, while a quasi-contract may not inaptly 
be called the shattered remains of an express contract. The express contract 
has been broken, but not wiped out of existence. What is left of the obli- 
gation is called a quasi-contract. 

(3) The third available remedy is for the injured party to sue 
for damages sustained by reason of the breach. (Anson, Con- 
tracts, p. 308.) It was shown in § 122 that whether or not the 
breach was sufficient to discharge the contract, yet it always gave 
rise to an action for damages. This is a subject, therefore, which 
we shall next consider. 

130. DAMAGES. — The general rule for determining the 

67 



§131 



CONTRACTS 



amount of damages recoverable is that the amount shall be the 
equivalent of, or a compensation for, the loss or injury suffered. 
(112 Mass. 497.) If no loss has occurred the plaintiff is only 
entitled to t' nominal damages," e.g., one cent. In general, 
damages are given only as compensation, and not as punishment. 
It is only actual and direct loss, and such consequential injuries 
as are sustained as the natural and direct results of the defendant's 
violation of his contract. Remote damages, meaning those rising 
indirectly, cannot be recovered. * In one case where a contractor 
was not allowed to carry out a bargain the damages were held to 
be the profits he would have made on the job. But generally 
such profits are too conjectural, and subject to too many con- 
tingencies to admit of proof in court. And profits contingent 
upon speculations are not generally recoverable. (110 U. S. 338.) 

131. For the purposes of engineering contract-writing, damages 
are of two sorts, liquidated and unliquidated. By hquidated 
damages is meant the sum agreed upon in advance by the parties 
as compensation for a breach ; by unliquidated damages are meant 
sums such as a jury would award when the case is presented to 
them upon its own merits. Formerly it w^as not uncommon to 
provide that if, for instance, the work was not completed at such 
a date, a certain sum was agreed upon as a penalty to be 
paid by the contractor. There is a difference between a penalty 
and hquidated damages, however. In effect the difference 
is that the amount which can be recovered in a suit under a 
penalty clause is not the sum named as such, but only the 
actual damages sustained; whereas liquidated damages are 
assessed at the sum agreed upon by the parties. To be enforce- 
able, liquidated damages must be commensurate with the in- 
juries suffered, and this is a general rule of law. Such a stipu- 
lation is good when the damages cannot be ascertained.! This 
point is illustrated by the peculiarity of engineering work where 
all parts ought to progress at a fixed rate of speed, and it might be 
impossible to determine just what loss was suffered by reason 
of a failure of some one to live up to his contract as to time of 
delivering materials, etc., etc. 

To evade the provision for liquidated damages, the contractor 
must show that the sums stipulated are unreasonable or exor- 

* See Appendix Note 8. "Indirect Damages." 
tSee AppendLx Note 9. "Liquidated Damages." 

68 



CONTRACT PRINCIPLES §131 

bitant. Encountering difficult construction, the happening of 
casualties beyond contractor's control, such as delay by high 
water, meeting harder and tougher rock, etc., will not relieve from 
a provision for liquidated damages. 



69 




70 



QUESTIONS 

Questions for Study and Review 
Chapter III 

1. How must an express contract he formed? Becomes a bind- 
ing obligation when? 

2. When is a revocation operative? 

3. What is the effect of failure to observe the explicit terms of an 
offer? 

4. Tell how and when acceptance is completed. 

5. Cite examples of public offers. How is acceptance mnde? 
What is the status of a bid tendered? 

6. What formality is required in making an acceptance? 

7. Can an acceptance be withdrawn? Why? 

8. What makes the subject of implied contracts a difficult one? 

9. What can you say as to the necessary lim^itations on the 
language? 

10. Explain the necessity for rules for ^' construing '' contracts. 

11. How will you detect the presence of an implied contract? 
Give an illustration of such a contract. 

12. When will the law not imply a contract though the facts 
might seem to warrant it? 

13. What is a conditional contract? Give an example. 

IJi-. What can you say as to express and implied conditions? 

15. How are conditions introduced into contracts, and what sorts 
are there? 

16. Explain meaning and effect of " condition precedent." 

17. Suppose a valid condition precedent is not observed. What 
happens? 

18. Cite three of the commonest conditions precedent found in 
engineering contracts. 

19. What language should be used in creating a condition prec- 
edent? Suppose no mention is m^e of the condition? 

20. What is the object of a " condition subsequent "? They 
commonly occur where? 

21. Distinguish between conditions precedent and concurrent. 

22. " Rules of Construction/' — what are they? 

23. What is the foremost rule of construction? 

24. How will you construe a contract exhibiting marked incon- 
sistencies? 

25. How will the acts of the parties affect tJte interpretation? 

71 



CONTRACTS 



26. Recite upon the relative importance, or weight, of the parts 
of a contract. 

27. What is ike aim of our study of contracts? How accom- 
plished? 

28. " Work to he to the satisfaction of the owner, ^^ — what is 
m^ant? 

29. What is the relation of " custom and usage " to engineering 
contract-writing? Tell how it becomes important. 

30. What is the rule as to necessary implications? Why neces- 
sary? 

31. Can a usage he claimed? Under what circumstances? 
What relation does usage have to express terms? 

32. Why is conflict of laws important for the engineer? How 
does the conflict arise? What about the size and scope of the 
subject? 

33. Explain " Lex loci contractus ,^^ and apply it to corre- 
spondence. 

34' How does " intention of parties " bear upon the foregoing? 

35. What law governs contracts pertaining to real estate? 

36. Does the rule as to ',' lex fori " seem reasonable to you? 
Why? 

37. What is the rule connecting the place of making with the 
validity of a contract? 

38. Explain meaning of '' discharge of a contract.''. Leading 
m^de is what? 

39. What is the question of substantial performance? Illus- 
trate. 

40. What do you understand by i[ specific performance "f 
Granted by whom? 

42. Is " specific performance " applicable to engineering con- 
tracts? Explain why or why not. 

43. What is the origin and position of the system of jurispru- 
dence known as " equity "f 

44' What is the legal theory of damages with respect to the per- 
formance of a contract? 

45. Under what conditions may specific performance be granted? 

46. Explain how tender of performance will be a condition prec- 
edent to a right to sue. Its effect is what? 

47. When is " substantial " performance {tlie issue) raised? 
What is the object of the doctrine? 

72 



QUESTIONS 

48. Who determines whether or not there has been substantial 
performance? 

49. Explain " quantum meruit " in this connection. 

50. Illustrate what is meant by '' entire " and by '' separable " 
contracts. 

61. Summarize upon the various phases of " performance.^' 

62. Discuss substantial performance in relation to discharge. 

63. Explain discharge by agreement. What are the requisites? 
When can it not be done? 

64' Suppose new matter is inserted into the contract, — what 
happens? 

66. Illustrate what is meant by " cancellation and abrogation " 
clauses. 

66. Explain carefully '' discharge by waiver.". Why import- 
ant to the engineer? 

67. What is meant by discharge by '' accord and satisfaction "? 

68. How should alterations be provided for? What part does 
the intention of the parties play here? 

69. What is the relation of consideration to the matter of altera- 
tions? Discuss. 

60. " Changes may be made without further consideration ,". — 
comment upon this. 

61. When is a discharge effected by an alteration? 

62. What is the bearing of the question of a seal upon alterations? 

63. What does Wait say as to supplemental contracts? 

64. What about letters ordering " extras "f How do they con- 
strue the contract? 

66, What is the meaning of '* extras "? Explain their import- 
ance. 

66. What is a fair and common provision regarding them? 

67. Suppose additional drawings, or details are to be furnished, 
— how should the situation then be handled? 

68. Why should specifications carefully delimit the work? 
What is the contractor' s natural position in the matter? 

69. How do controversies over extras most frequently arise? 
Avoided how? 

70. Explain a practical way of providing for extras and of 
payment for them. 

71. Name three other ways of providing for extras and their 
payment. 

73 



CONTRACTS 

72. Recite upon discharge by payment. 

73. What is meant by " breach "f What is its effect? 
74' Under what circumstances does a breach occur? 

75. What are the questions presented tinder a breach? 

76. How will the question whether there has been a substantial 
breach be answered, — and by whom? 

77. If suspension of work by the contractor is being considered, 
how should the contract deal with the m.atter? 

78. What points are usually covered when dealing with such 
suspension? 

79. What rights has the injured person when a contract is dis- 
charged by breach? 

80. Explain as carefully as possible the m£aning of '' quasi- 
contract.'' 

81. What is the root idea in '' quantum meruit?'' 

82. Distinguish between a quasi-contract and an implied con- 
tract. 

83. What is the general principle upon which damages are 
awarded? 

84. Can you distinguish between direct and indirect damages? 

85. Tell the difference between liquidated and unliquidated 
damages. 

86. Distinguish between liquidated damages and penalties. Tell 
why the former are nwre likely to be recognized in an engineering 
contract. 

87. Docs difficult construction relieve against liquidated dam- 
ages? Why? 



74 



Chapter IV 

AGENCY, TORT, AND INDEPENDENT 
CONTRACTOR 

The engineer must often act as the representative or agent of his employer. 
He enters upon this capacity by virtue of a contract, either express or 
impHed, and when the relation is properly established, he can bind his 
employer upon contracts made in the latter's behalf; hence the law of 
Contract is thoroughly interwoven with the law of Agency. We shall see 
how the agency may be set up, what some of the duties are which the 
principal owes his agent, and vice versa, as well as what obligations the 
agent owes third persons. 

The rights possessed by reason of one's membership in a civilized 
community will then be examined, and their distinctions from contract 
rights noted. As the above mentioned " natural" rights will be met at 
every turn, it behooves the engineer to recognize the elements of Fraud, 
Negligence, Nuisance, and Trespass, to be well-cognizant of the sources of 
his liability in this respect, and to thoroughly understand the status and 
obligations of the " Independent Contractor." 

AGENCY 

132. DEFINITION AND PARTIES TO THE RELA- 
TION. — Agency is the relation between two or more persons, 

created by a contract, express or implied, by which one 
(the agent) undertakes with more or less discretionary power to 
represent another (the principal) in the transaction of certain 
lawful acts or business. Agency is a subject of some complexity, 
and only a few of its prominent elements will be discussed here. 

At common law, every person who is competent to act in his 
own right, and for himself, may act by an agent. But a principal 
cannot confer authority upon an agent to do for him that which 
he could not do for himself, were he present and acting. As to 
who may be principal, the same rules of competency apply as in 
contracts, but any one with a sound mind and sufficient under- 
standing may act as an agent. In general, whatever a person 
may do for himself he may do by an agent. But this does not 
apply in extremely personal things such as making a will, or con- 
tracting a marriage. 

133. The agency relation is a contractual one. It exists by 
agreement, there must be a " meeting of the minds," and the 
intention of the parties must find expression either in words or 
action. Since no one can become the agent of another save by 

75 



§134 



CONTRACTS 



the latter's will and intention (express or implied), an agent cannot 

by performing an act create for himself authority to do so, nor 

can authority be proved by general reputation to that effect, nor 

by his own statement that he is an agent, except that he may 

testify upon this point in Court, like any other witness. 

Suppose you are a contractor engaged in construction, and some one 
comes upon the work, saying, "I am a new inspector sent here by the owners." 
Then he gives you orders which materially change the specifications, and, 
though you comply, you discover later that he had no authority to give such 
orders. In this case you have no redress against the owners for the additional 
expense caused you. It was incumbent upon you to ascertain whether such 
person was in fact the owner's agent and you must take the consequences of 
your neglect to do so. 

134. CREATION OF AGENCY. — When an agency is created 
by an express instrument, such a formal authority is called a 
power of attorney, and the agent is then called an attorney in fact. 
An agency will frequently be considered to exist when circum- 
stance of ordinary usage would necessarily imply an agency. 

Suppose a firm regularly paid bills contracted by its chief clerk, for in- 
stance, but later disclaimed a bill from the same sellers incurred by the same 
clerk, claiming they had given him no authority to buy for them. The firm 
would be bound, in such a case, upon an "agency by implication." 

But in the absence of substantial ratification, as in the above 

case, authority cannot be inferred from ordinary business or 

family relations. 

To illustrate: The president of a corporation has no power to enter 
into contracts in behalf of the corporation by virtue of his office merely, unless 
he has general or special authority given him. 

Again, suppose a contractor is working for a board or committee, and 
that its members visit the work, give directions, order changes or new work 
which can only be authorized by the board as a whole. If the contractor 
obeys such orders he is likely to lose the price of the unauthorized work. 
But if such acts are subsequently ratified (see § 142), authorized, and adopted 
by the board, then the contractor is in a safe position. 

But even then the contractor must beware that the board does not exceed 
its authority, for if it attempts to make a contract which is ultra vires (see 
§ 249) and void, he will be a loser as before. 

No one need deal with an agent unless he so chooses, but if 

he does he is bound to ascertain the extent of the agent^s authority 

'* at his peril," that is, take the consequences of his failing to do so. 

135. SCOPE OF AUTHORITY. — A principal is bound to 
give his orders in clear terms, and is responsible for any ambiguity 
in them. For if two meanings were possible and the wrong one 
was taken by the agent and acted upon by him, this binds the 
principal. To the same effect, it is clear that an engineer who is 
the owner*s agent to supervise construction, etc., has his powei-s 
strictly confined to those conferred in the contract. But it is a 

76 



AGENCY, TORT AND INDEPENDENT CONTRACTOR §138 

well-defined and logical principle that an express authority to do 
a certain thing carries with it an implied authority to do all those 
things which are necessary to the full achievement of the thing 
expressly mentioned. 

Of course the difficulty arises in determining whether or not a 
certain unmentioned thing was logically necessary to accomplish 
the stipulated result. Thus the way to avoid this difficulty in 
engineering contracts is to specify in great detail just what the 
engineer's duties shall be, but even then, the question may still 
arise with reference to something not mentioned. 

Thus, unless specially authorized, an engineer may not promise extra 
compensation for work or materials comprised in the contract; nor add new 
terms to the specifications; nor deviate from a specified mode of measuring 
quantities, even though in his opinion some other method is far better and 
fairer. (Compare with § 440.) 

136. DELEGATED POWERS. — Another important prac- 
tical matter relates to the delegation of authority by one agent 
to another, sometimes called a sub-agent. It is in theory held that 
the trust committed to an agent is exclusively personal, and can- 
not be passed on by him to another, without express authority 
for doing so. But this rule is modified by the usages of the trade 
or profession. (Consult § § 85-7.) 

137. Let us look at the case of an engineer who may be an 
agent (for special purposes), of the Chief Engineer, who, in turn, 
is the agent of the Railway Company which employs him. From 
necessity the rule against delegation does not apply when the 
object of the agency cannot be attained without it. Thus, the 
Chief Engineer cannot be held to perform in person all the mechani- 
cal or clerical work required to accomplish the tasks he is charged 
with. This would include drafting, measuring, figuring, driving 
stakes, inspecting work and making estimates, and even the 
general verification of all data. It is reasonably held that so long 
as the Chief maintains a constant and careful supervision over 
the acts and operations of his assistants, knows what work they 
do, and how they do it, and insists that all doubtful and disputed 
questions shall be referred to him, this is all that was contem- 
plated in the contract of his employment. 

138. Yet there is a higher class of duties, properly called 
judicial acts, which the Chief cannot delegate to his assistants. 
Examples are : — Determination of the proper methods of pro- 
cedure; the proper classifications of materials; the passing upon 

77 



§139 



CONTRACTS 



the sufficiency of work done; and whether the work has been 
adequately completed, etc. 

When the engineer is a public officer, as a City Engineer, 
having duties specifically required of him by law, these he cannot 
delegate. He can, however, employ assistants and can ratify 
and adopt their acts to a very great extent. There is, perhaps, a 
nice distinction between this and the ''pubhc" acts just mentioned. 

139. AGENCY BY IMPLICATION. — The circumstances 
under which an agency may arise by implication are practically 
numberless. The general principle is that where a first person has 
'' held out " a second person as (i.e. represented him to be) his 
agent, and has permitted the second person to act as such agent, 
then the principal will not be allowed to deny that the agent was in 
fact authorized. If by acts and conduct the principal has led 
others reasonably to assume such second person to be his agent 
and duly authorized to act for him, and a third person has rehed 
upon the apparent authority of the agent to his prejudice, the 
same result is reached. This is because, from the view-point of 
equity, one must act in good faith so as not to mislead others. 
Thus if one stands by and permits another to make a contract for 
him, without denying the apparent authority, he is in law pre- 
vented ('* estopped ") from denying that the other did have 
authority. (See also § 249-[4].) 

Suppose you are the purchasing agent for a corporation, and you are 
informed that the Chief Engineer will need 5.000 bags of cement. A cement 
salesman comes in while you are in conference with the General Manager, 
and in his presence, you order the cement off-hand. The Manager makes no 
objection, but finding that the market price of cement has dropped con- 
siderably before the cement is to be delivered, he attempts to withdraw 
from the bargain on the ground that he never expressly authorized you to 
buy any cement, that is, your act was unauthorized. By the rule just given, 
the Company will be held to your agreement with the cement salesman. 

When an agency arises by implication it is limited to the 
reasonable and natural requirements of the case, or to the per- 
formance of those acts which might have been done by the 
principal. 

140. RATIFICATION is a prominent agency doctrine about 
which the engineer needs to know. By ratification is meant the 
giving of sanction and validity to the previously unauthorized 
act of one who has assumed to act for another. This assumption 
may consist (a) in exercising the power of an agency not yet 
created, or (6) in exceeding the scope of an authority which has 

78 



AGENCY, TORT AND INDEPENDENT CONTRACTOR §143 

been actually conferred. The act done must have been alleged 
to be in the name of the principal. The principal may ratify (1) 
by expressly adopting the act as his own, as by an oral con- 
firmation, or (2) he may so conduct himseK toward the assumed 
agent that the law will imply a ratification, as for example, where 
the principal accepts the benefits accruing from the agent's acts, 
but disavows his authority to do them. 

141. As to who may ratify, it is said that any one who can 
appoint an agent for the purpose of doing the act, can ratify the 
act which is alleged to have been done for him, after the event 
has happened. From this it follows that a principal cannot 
ratify an act done for him which he could not lawfully do for him- 
self. The student will observe that if this were not so, here would 
be found a cloak for all sorts of rascahties. 

142. Essentials to Ratification. — (a) The pretended agent 
must have assumed to act for some one else, for if the act was done 
in his own name, and on his own authority, it cannot be ratified. 
(51 111. 504.) This is because only the parties to a contract are 
bound by its terms. (See § 23.) 

(6) The person for whom the agent assumes to act must be 
identified by him as some particular person, though he need not 
designate the principal by name. The second contracting party 
must understand that some one other than the ostensible agent 
is interested in the contract, and that the unknown third party 
will be bound upon it if the terms are ratified by him. 

{c) The ratification must have been made upon full knowledge 
of the material facts, or in voluntary and willful ignorance of 
them. That is, an agent will not be allowed to indulge in fraud 
or sharp practice at his principal's expense. 

143. A matter closely resembling '' ratification," and often 
arising in sales where privacy is desired, is the doctrine of UN- 
DISCLOSED PRINCIPAL. The rule is that for acts done in his 
own name without disclosing his principal, the agent is primarily 
liable ; but if he is in fact acting for a principal, such principal may 
be bound upon the contract if the party dealt with (upon discover- 
ing this) elects within a reasonable time to have it so. This is true 
even though the credit was given to the agent under a misappre- 
hension as to his true character. (Mechem on Agency, and 48 
Conn. 314.) 

Let us look at a practical case: Suppose you are the locating engineer 

79 



§144 CONTRACTS 

for the X. Y. R.R. Co., and before your survey line reaches a town you observe 
that a certain town-lot occupies a strategic position for your Company. To 
forestall difficulties and delay (or perhaps your competitors) you quietly 
agree to buy this lot in your own name, without advising the seller oi your 
official position. This is later made known to him. Can he hold you or the 
Company for the price? By the rule just given, either the principal or agent 
can be held, at the seller's election. 

But this case presents certain other factors which may vary the result 
substantially. In the first place, being a sale of land, the Statute of Frauds 
(see § 299) requires the contract to be in writing; in the second place, deeds of 
land are nearly everywhere required to be under seal; and third, in interpreting 
sealed instruments, only parties named in such contracts are bound thereby. 
As a result, therefore, you only could be held by the seller. But had the sale 
been about anything other than real estate, the rule as to undisclosed principal 
would have applied without exception. 

144. The doctrine of Undisclosed Principal benefits a person 
who deals with another when the second person is an agent, though 
this fact is unknown to the first party. It gives the first person 
additional rights since by it he has a choice of the persons whom 
he will hold upon the contract. It is distinct from the whole idea 
of " ratification " since its effect is to wholly relieve the agent of 
his responsibility for the contract which he has made. 

It is to be borne in mind that ordinarily a leading purpose of an agency 
is to allow the agent to make contracts on behalf of the principal, and which 
bind him, if the agent was acting within the scope of his authority. They are 
truly the contracts of the principal, and the agent is merely a tool or mouth- 
piece. In making such contracts, the agent relieves himself of responsibility 
by making the contract in his principal's name, signing it "M. N., 6y A. B , 
Agent." (See also § 364.) 

The discussion of undisclosed principal, it will be seen, deals 
solely with the case where the agent makes no mention of his 
principal, nor indicates that there is one. Hence if the principal 
is to be held we run counter to the rule '' Only the parties [ named 
in] to a contract are bound by it." (§ 23.) Thus the agency 
rule of undisclosed principal is an exception to the broad rule of 
contracts just stated. 

145. ASSIGNMENT OF CONTRACTS. — Because of its 
apparent similarity to the topic " undisclosed principal," assign- 
ment of contracts may easily cause the student some difficulty. 
We are very famihar with the rule that only parties to a contract 
are bound by it. Since every person contracts with reference to 
the responsibihty, character, etc., of the other party, there would 
be no safety in contract if the other party could, at his pleasure, 
substitute another in his place. Also, this would plainly defeat 
the requisite " meeting of the minds." (See § 18, [4].) By 
assignment is meant the transfer of one's rights or duties under a 

80 



AGENCY, TORT AND INDEPENDENT CONTRACTOR §147 

contract to an outsider not a party to it. The essential part of the 
rule is brief : — An assignment cannot be made without the consent 
of the other party to the contract. (Exception: Negotiable In- 
struments.) Strictly speaking, what happens in an assignment is 
that the original contract is cancelled by agreement (consent) and 
a new one is substituted in its place. 

In general, benefits under a contract can be assigned, while liabilities 
cannot. Another sort of possible assignment of non-personal duties is treated 
under "Delegation of Authority " (§§ 136-7). With assignments for the 
benefit of creditors we have nothing to do, as this forms an important part 
of the law relative to bankrupt estates. 

146. SUMMARY OF AGENT'S AUTHORITY. — Mechem, 

a well- 
known writer on Agency, summarizes the agent's authority, thus : 
It consists (1) of the powers directly and intentionally conferred 
by the voluntary act of the principal ; 

(2) of those incidental powers which are reasonably necessary 
to carry into effect the main powers conferred, unless they are 
known to be prohibited ; 

(3) of those powers which custom and usage have added to 
the main powers, and which the parties are deemed to have had 
in contemplation at the time of creating the agency, and which 
are not known to have been forbidden ; 

(4) of all such other powers as the principal has by his direct 
act, negligent omission, or acquiescence, caused or permitted 
persons dealing with the agent reasonably to believe that the 
principal had conferred; 

(5) of all those powers whose exercise by the agent the prin- 
cipal has subsequently, with full knowledge of the facts, ratified 
and confirmed. (Mechem on Agency, § 282.) 

147. DUTIES OF AGENT. — Having studied somewhat the 
extent of the agent's power or authority, we will now consider 
briefly some of his duties. The agent is the representative of his 
principal, and it is his duty to act with loyalty, fidehty, and candor, 
free from all antagonistic interests which might prejudice the 
claims of the principal to his unbiased services. (11 Mich. 222.) 

In a case where the agent or clerk of a warehouseman secretly secured a lease 
of the premises which he knew his employer desired to renew, he was held to 
have secured the same for his principal, and was compelled to make it over. 
(59 Calif. 119.) 

Similarly, an agent who was employed to settle a claim was not allowed 
to buy it in at a discount, and then enforce it against his principal for the 

81 



§148 CONTRACTS 

full amount, for it was held that the benefit of the discount secured must 
inure to the principal. (59 Vt. 569.) 

The foregoing tends to show that a purchasing agent has no 
right to buy on his own account when the market is low, and then 
to resell higher to his employer unless the principal is fully aware 
of the whole transaction. 

148. An agent must account for all money received in the 
course of his agency, and should he mingle it with his own and 
the whole be stolen, he must make good the whole amount. But 
if without his fault or neghgence the principal's money be lost, 
he will not be responsible. 

It is an agent's duty to notify his principal fully and promptly 
upon all matters pertaining to the latter's interests. This rule 
should be emphasized because notice given to an agent is held to 
be notice given the principal. This is frequently an element of 
highest importance in damage suits for negligence. 

149. Instructions to an Agent. — It is the agent's plain duty 
to obey the wishes and instructions of his principal if they are 
reasonable and legal. The agent is liable for losses caused by 
his disobedience. (104 Mass. 152.) Secret instructions from the 
principal contrary to the agent's apparent authority cannot be 
availed of as a defense by the principal against persons who have 
dealt with the agent in accordance with his apparent authority. 

In cases of sudden emergency or accident, the agent may 
overstep his instructions if prudence and a sound discretion would 
warrant his so doing. As to his duty in carrying out his agency, 
considerable is said under the topic ''Negligence" (§§164-6), 
which may be advisedly read in this connection. 

150. AGENT'S LIABILITIES TO THIRD PERSONS. — 

The agent's liability to third persons arises : — 

(1) from the fact that he has contracted so as to bind him- 
self (instead of his principal) ; or 

(2) because he has failed to exercise a proper regard for 
the rights and privileges of others while in the prosecution of 
his agency. That is, he has committed a ''tort." (See § 156.) 
One does not cease to be responsible for his wrongful acts (torts) 
merely because he happens to be acting as an agent for another, 
for under these circumstances both principal and agent may be 
liable in a suit for damages. 

151. If an agent makes known to the other party all the facts 

82 



AGENCY, TORT AND INDEPENDENT CONTRACTOR §153 

as to the scope of his authority, it is the other's duty to satisfy 
himself as to their truth. If the agent expressly misrepresents 
his authority, he will be liable for the results of it. (104 Mass. 
336.) When an agent conceals the fact of his agency, and acts 
as though he were the principal, he binds himself, only (42 111. 
238). (But see § 143-4, '' Undisclosed Principal.") It is reason- 
able that if an agent would avoid responsibility he must declare 
the fact of his agency plainly and openly, and not leave it to others 
to discover. (39 Vt. 260.) 

152. ENGINEER AS AGENT. — As an agent of the owner, 
an engineer has certain duties to perform, since the law implies a 
promise from agents that they will exercise competent skill, 
proper care and diligence in the service which they undertake to 
perform. This duty to adhere faithfully to specifications, or to 
instructions, is a primary one, and the agent is responsible for 
any losses occasioned by a non-fulfillment of his duties, either in 
exceeding, violating, or disregarding instructions. 

153. If an engineer assumes the responsibilities of an agent, 
what care and skill are required of him? If a person offers his 
services to the community, or to an individual, for employment 
in any professional capacity (as a surveyor, or engineer, for 
instance), he impliedly warrants in his contract of employment 
that he possesses that reasonable degree of skill, learning, and 
experience ordinarily possessed by those who profess the same art 
or calling. He also agrees that he will use reasonable and ordi- 
nary care and diligence in the application of his skill and knowl- 
edge to accompHsh the purposes of the contract. But he does 
not warrant that he will exercise extraordinary care and diligence, 
nor that he possesses uncommon skill. 

It is to be noticed that neither absolute accuracy nor success is to be 
taken as the test for the skill or capacity of one in a professional line, since an 
engineer does not warrant the absolute perfection of his plans nor structure 
without an express stipulation to that effect, any more than a doctor guaran- 
tees a cure. He is chargeable with errors and their effects only when such 
could not have arisen save through want of reasonable skill and diligence on 
his part. As a practical matter (for the comfort of the engineer), the person 
who asserts the want of skill in the engineer must prove it (generally a difficult 
thing to do). 

The foregoing presents but a few aspects of the highly impor- 
tant subject of Agency, and their treatment is extremely brief. 
The student is urged to form the habit of drawing upon his own 
imagination or experience for illustrations of the numerous prop- 

83 



§154 CONTRACTS 

ositions that have been laid down since it is only thus that they 
become significant. Want of space has here prevented the 
insertion of much illustrative material. 

TORTS 

154. RELATION OF COMMON AND STATUTE LAW. — It 

has been explained (§21, Footnote) that the common law is a 
set of principles established by society for the regulation of 
men's conduct in their relations to one another. The common 
law is thus directly descended from those customs which have 
grown up representing the notions of justice and propriety de- 
veloped in the human race (especially the Anglo-Saxon branch 
of it), finally crystalizing into what we familiarly speak of as 
" law." The common law is to a very large extent unwritten, 
that is to say, it is not formulated and then promulgated by legis- 
lative enactment. A leading reason for this is that it would be 
impossible to foretell and provide for the countless and varied 
situations in which civilization places individuals. As it is not, 
for the most part, found on the statute books, the common law 
is effective through the application of certain weU-defined prin- 
ciples, or rules, merely. These rules are of necessity extremely 
general in their terms, and are called into play when the judges 
beheve them to be applicable to the particular case in hand. 
Thus " studying law " consists largely in a study of these general 
rules and principles, their analysis, elucidation, and application 
in the different situations which have arisen in times past, and 
have been passed upon (adjudicated) by the courts. 

155. Speaking generally, any or all of the rules of the common 
law may be enacted into statutes by the appropriate legislative 
body, if the rules are susceptible of sufficiently exact formulation. 
Then, of course, the terms of the statute will take precedence over 
the common law rules. Such enactments have taken place to a 
greater or less degree in all the States, and by this method many 
difficulties and inconsistencies of the common law have been 
remedied. It will be seen, therefore, that where there is a ques- 
tion as to one's legal rights, and the case is doubtful, the only 
safe way is to ascertain the statute, if there is one; if there is no 
statute on the subject, the common law doctrines will always 
apply. It should be noted, however, that since the common law 
furnishes the technical terminology of the statute law, the old 

84 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §158 

common law doctrines must be called into play to interpret the 
statutes upon the same subjects. 

156. CONTRACT AND TORT DISTINGUISHED. — We 

have 
heretofore studied the doctrines underlying the legal rights arising 
under a contract. The characteristic feature of every contract 
is that the rights arise because of a '' meeting of the minds," i.e. 
an agreement. Torts, in distinction, do not arise by reason of an 
agreement made with any one, but because one's natural rights, as 
they are called, have been violated. These natural rights are 
common to every member of society, and are possessed by reason 
of such membership. It is fundamental in our society that every 
man has a right to live and to do as he pleases, to accumulate 
property, and to protect it ; but he must do all these things with a 
reasonable regard to the rights of others, since they too have the 
same privileges. In brief, a TORT is a private, civil (as dis- 
tinguished from criminal) injury to a person, causing damage to 
his health, body, reputation, or property. 

For examples : — Society admits that I have a right to my 
personal safety and freedom ; to the society of my family ; the 
right to protect my reputation ; the right to be immune from 
damage by fraud, i.e. a right not to be cheated; and in general, 
I have rights of possession in things which belong to me. Any 
unjustifiable infringement by another upon any of these rights con- 
stitutes a tort. 

157. Compensation for tort is by the infliction of a penalty or 
judgment in money, called damages, providing, of course, actual 
loss or damage can be shown by the plaintiff. To secure the 
benefit of the laws protecting these rights a great amount of legal 
work is done. As these rights lie close to the field of most human 
efforts, the variety of tort cases which may arise is almost infinite. 
However, only a few of the leading heads can be touched upon 
here, and these will be selected with reference to the duties of the 
engineer and his liability in tort. 

158. KINDS OF TORT. — Perhaps the leading phases of 
tort are instances where one's personal liberty or security are 
involved, though here the cases will shade off gradually into the 
realm of criminal law, foreign to our present purposes ; the pro- 
tection of one's rights in his reputation, enforced by actions of 
'' Slander and Libel " ; and torts with reference to rights its 

85 



§159 CONTRACTS 

property, often extremely important. It is a point of significance 
that intent is not the keynote in torts as it is in criminal law ; and 
that the word '' malice " has its popular meaning so far extended 
as to cover acts done in total disregard of the rights of others. 

159. PROXIMATE CAUSE. — It is a fundamental prop- 
osition, in torts, that '' Every man is presumed to have known 
and to have intended the natural and reasonable consequences 
of his own acts." An inevitable corollary is : *' Every man is re- 
sponsible for all the consequences that could have been foreseen by 
an ordinarily prudent and careful person as likely to follow from 
his acts." To the same effect is : 

" A person is responsible only for those consequences which 
result immediately (i.e. directly, not necessarily immediate in 
point of time), from his own acts." In legal phrase, a person is 
responsible for results of which he is not the remote but '' proxi- 
mate " cause. 

In an old Massachusetts case, there were wholesale druggists who sold 
antimony instead of a manganese preparation named on the label which the 
package bore. After passing through several hands it came to the consumer 
who made a very unusual use of it, such that the supposed manganese mixture 
exploded violently, doing great damage. The consumer sued the whole- 
salers who had misnamed the substance, saying the accident was their direct 
fault. 

But the Court held that the use made of the stuff was so unusual that no 
person could be required to foresee such a use, or so to understand his respon- 
sibility as to be able to guard against such effects. In other words, though 
the act of the wholesalers was the direct cause, yet it was too remote to render 
them liable for the chance effects of their acts. 

It is said that proximate cause is not to be determined by time 
or distance, but by succession of events ; the question is whether 
there was any intermediate self-operating cause disconnected with 
the primary cause which produced the injury. If there was no 
intermediate cause the act of negligence (for example) must be 
considered to be the proximate cause of all the consequences 
arising therefrom. 

160. JUSTIFICATION IN TORT. —A man may escape 

the legal effects of his 
acts which would otherwise be torts, in several ways, some of 
which are as follows : — 

(1) He will be justified by reason of leave or license given him 
by the injured party. Thus, if a person gives another permission 
to pass and repass over his land, then the latter cannot be sued 
as a trespasser. 

86 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §161 

(2) Justification by legal authority. Thus, a sheriff may, for 
due cause, take possession of my person, or of my goods. Were 
it not for the justification which the law affords him, he would 
have committed a serious tort against me. 

(3) Public policy justifies entry for the abatement of a nui- 
sance, when to enter upon the land otherwise would be a trespass. 
It is the same if I enter to recover my property upon the land 
of another; or enter for the purpose of doing business with him. 

(4) Self-defense is a justification for the use of force which 
would otherwise be an assault. It should be said, however, that 
a too severe repulse may be construed to be an assault on the part 
of him who was first attacked. 

(5) Inevitable accident nullifies the theory of tort. We 
have seen that liability arises for those acts leading to results 
which could reasonably have been foreseen. It follows that there 
is an excuse if the result was in the nature of an unavoidable 
accident which could not have been foreseen. One is not entitled 
to remuneration for any injury which comes to him through any 
of the ordinary accidents of life, not imputable to negligence nor 
to the violation of law. 

(6) An act of the injured party may have so contributed to 
the injury that he has himself principally to blame. Thus '' con- 
tributory neghgence " is a favorite defense in all sorts of accident 
cases, and if it can be successfully maintained, nullifies the tort 
action. 

161. DISCHARGE OF TORT. — There are various ways 

in which the legal right 
to sue for damages in tort may be discharged, or lost. As it is a 
matter essentially personal, it is wholly within the control of the 
parties. Hence they may discharge the tort : — 

(1) By agreement. Here the essentials of contract law must 
be observed. 

(2) By accord and satisfaction. The parties do not wait to 
go to law, but the wrongdoer settles with the injured party for 
the injury suffered, and here, again, the elements of a contract 
must appear. 

(3) By a judgment rendered by a court of competent juris- 
diction. Having once obtained a favorable judgment, the plain- 
tiff cannot again go to the Court with the same set of facts and 
ask for another judgment. 

87 



§162 CONTRACTS 

(4) By death of either party the tort was discharged at 
common law. But by statute many torts now survive the death 
of either party. Examples are: assault, false imprisonment, 
damages to the person (accident cases), etc. 

(5) By bankruptcy of the wrongdoer. But if a judgment has 
been rendered against a defendant for fraud, or for willful or 
malicious injuries to the person or property of another, then his 
subsequent discharge in bankruptcy will not discharge his obli- 
gation to pay that judgment. 

(6) By Statute of Limitations. The plaintiff will lose the 
right to sue for a tort if he waits for six years (or whatever period 
the particular statute requires) before beginning. 

SPECIFIC TORTS 

162. TRESPASS. — An incident in the ownership of real 
estate is the right to enjoy the sole possession of it. Thus every 
invasion of property, be it ever so shght, constitutes a trespass 
because the possession has been interfered with. 

Suppose a contractor when working on a street, deposits earth and 
rubbish upon an adjoining lot, and thereby damages choice shrubs, etc. He 
will be liable to the lot-owner for a trespass. 

In a construction case, it was held to be the duty of the contractor to 
ascertain the right of the city to rest an embankment upon abutting premises 
without the consent of the owner, for this was a trespass. 

When a contract provided that waste earth should be deposited "where 
ordered by the engineer," the contractor did so but recovered damages from 
the employer because the contractor was found liable to the lot-owner since he 
had committed a trespass in making such disposition. 

Another situation similar to a trespass, though not so called, 
is worthy of special attention from the engineer. A deep exca- 
vation is made close up to a property line and causes a part of the 
adjoining land to move or slide toward the hole. The law says 
the right to lateral support of one man's land by that of adjacent 
owners is an incident of its ownership, so it follows that any inter- 
ference with that right is a wrong — a tort — and damages will 
accrue therefor. (See § 210, Lateral Support.) 

163. NUISANCE. — A nuisance instead of being a direct 
injury to property, like a trespass, is an unlawful act done upon 
other property which causes injury or annoyance to a person in 
the enjoyment of his property. This unwarranted violation of 
another's personal right is a tort of which the law will take notice. 

Examples: — Deposition of noxious vapours or materials upon the land 
of another; polluting a water-supply; letting water accumulate and stagnate 

88 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §164 

near another's premises; making unreasonable and discordant noises at un- 
seasonable times, etc. 

To protect the private rights of numerous persons (collectively, 
the public), the law regulates the inspection of the sanitary con- 
ditions of lodging-houses, hospitals, factories, mines, cemeteries, 
etc., and will prevent the pursuit of any offensive business in 
certain districts. (Ill U. S. 756.) It is to be observed that these 
instances may frequently be torts against the community, instead 
of individuals, hence the subject would be more largely developed 
if we were discussing public nuisances — an important class by 
themselves. 

164. NEGLIGENCE. — '' NegHgence is the failure to observe 
for the protection of the interests of another person that degree 
of care, precaution and vigilance which the circumstances justly 
demand." Twelve jurors chosen haphazard from the community 
often determine whether " negligence " was present in a given 
set of facts or not. They are frequently persons lacking exact 
knowledge or severe mental training. It is not surprising, there- 
fore, that there have been wide variations in fixing the practical 
interpretation of the word. However, we can at least direct our 
minds toward the tort, " Neghgence," and learn the spirit of the 
thing which is to be avoided. 

So far as it is possible to define it, the definition is, as we have 
seen, couched in general and even vague terms. It may be prac- 
tically put in the form of a test-question : — " Did the person, in 
view of all the circumstances, use due diligence and care to act 
as an ordinarily prudent and careful person would have acted 
under the same circumstances?" If he failed to do all this, then 
there is neghgence, and liability in tort accrues. 

The leading uncertainties, of course, are, what is ^' due dili- 
gence " under the particular facts of the case, and also, what 
degree of skill and intelligence, mental alertness, foresight and 
caution is to be presupposed in that fictitious personality, — " the 
ordinarily prudent and careful person." 

To the student of the exact sciences, the attempt to analyze 
this situation may seem hopeless. The law books are crowded 
with cases upon it, because all accident cases are based upon the 
want of " due care " on the part of one person, and " negligence " 
in another. Hence its importance to engineering students, as 
future men of affairs. 

89 



§165 CONTRACTS 

165. ENGINEER'S DUTY AS TO NEGLIGENCE. — When 

a person accepts an engagement to work, he agrees that he lias 

the requisite skill and knowledge to do that work. He agrees 

that he will use reasonable care and diligence in their application, 

that he will exercise his best judgment, and that he wiU be honest. 

He will be personally liable if an injury results from his negligence 

or failure to perform any of these conditions. It is immaterial 

how high his standing may be, if he has skill and does not apply 

it he is guilty of neghgence, and liable to those who suffer through 

it. And if he does not possess the skill, he will also be liable to 

his employer as upon a breach of contract, for it was a part of his 

contract of employment that he did have the ordinary amount 

of skill possessed by those in the same profession. 

In one case it was held that one who represented himself to be a builder 
with long and wide experience, could be dismissed for incompetence, and his 
employer might recover from him any damage sustained by reason of his 
deceit, as well as tort for negligence. It has also been held that engineers 
and architects are responsible for defective and insufficient plans, and will 
be responsible for neglecting to see that the structure is at least reasonably 
well built. 

It has been said that failure to use skill is negligence, but if 

the methods adopted are not in accordance with the estabhshed 

practice in that profession, but are positively bad and injurious, 

then the case is not one of negligence, but of want of skill. 

166. Where daniages have been sustained by the owner by 
reason of his engineer's negligence, he may set off such sum against 
the wages due the engineer. This will also be true when an 
engineer is called upon in his professional capacity to make inves- 
tigations, inspections, or estimates, and either through want of 
skill or neghgence upon his part, the report or estimate is incorrect. 
He will be responsible to his employer for unnecessary expenses 
or injury occasioned in this way. And an engineer in the usual 
construction job, where he inspects or directs the inspection, is 
responsible for his failure to give such care and attention as would 
detect any important variation from the plans and specifications. 

167. SOURCES OF LIABILITY. — In leaving this subject 
of torts, it may be said that there are at least three different ways 
in which liability may arise which are of especial interest to 
engineers. They are: — 

(a) By act of the party, — i.e. by direct commission. 
(6) By consent, that is, by ratification (see §§ 141-2) or 
acquiescence. 

90 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §169 

(c) By command, that is, by acting through an agent. 

(d) By instrumentalities. This is important for engineers 
and contractors especially. Perhaps the typical illustrative 
case is water stored in a reservoir, or impounded behind a dam, 
which breaks away, causing great damage. It is the contractor's 
failure to act which is responsible for the damage, though the 
damage arose through an instrumentality in his custody, namely, 
the potential destructive power of the stored water. In such 
cases the contractor is bound to keep control of the water, or take 
the consequences in damage suits ; he is said to keep custody at 
his peril. A close analogy is found in the keeping of an extremely 
fierce dog. So long as the owner keeps it chained up, and away 
from people, no one can complain. But if it breaks loose he must 
settle for the damage it does. 

168. The storage and handling of dynamite and other explo- 
sives falls within this category, also. So does the damage done 
in boiler explosions, and injuries done through the presence of 
stray currents of electricity. Cases of electrical damage are 
where water pipes adjacent to electric power stations are damaged 
by electrolysis*, or where a workman or other person is seriously 
shocked, not through contributory negligence, but by reason of 
defective insulation or faulty construction. 

Tort of Water Companies. — With reference to the liability of 
Water Companies for fire losses arising through insufficient water 
supply or pressure at street mains, hydrants, etc., it is generally 
held that the Company is not liable, since the contract they make 
with private customers or municipalities is not one of insurance, 
but merely to supply water in a businesslike and non-negligent 
fashion. There is sound policy in this view, since the Water 
Companies do not, nor are they permitted to, charge insurance 
rates, but merely a reasonable compensation for services rendered, f 

169. RELATION OF TORTS TO AGENCY. — The law of 

torts enters 
into every legal relationship. Let us consider an illustration of 
its relation to the law of agency. Take the agency principle: 
" One who can legally act for himself can do the same act through 

*See Appendix Note 10. " Electrolysis." 

t There is a very thorough article on this topic in Municipal Engineering, 
August, 1909, p. 97, discussing the variations in rulings of the Courts in 
various States, and citing probably several hundred cases. Also Eng. Rec. 
Vol. 59. pp. 233 and 288. 

91 



§170 CONTRACTS 

an agent," and put it beside the tort doctrine: " A principal is 
liable for all the acts of his agent when they are done within the 
scope of his employment." Who then is liable if an agent com- 
mits a tort? Is he personally liable, or will the doctrine called 
respondeat superior (meaning that the principal is responsible 
for the acts of his agent) govern the case? 

A railroad making a grade crossing improvement employs its own 
laborers in charge of an engineer, who is grossly negligent in providing suitable 
red lights, or other danger signals at night. Some one falls into the trench 
and is seriously injured. Who is liable for the damages? 

The rule is that the agent is not liable to the injured person for failing to 
do his duty. Hence the railroad must settle, but it can sue the engineer 
for his negligence, since it is a breach of his contract of employment, as already 
noted. (See § 165.) 

It has been shown that negligence is a tort. (§ 164.) Therefore if the 
person injured is to recover any damages it is because he has a right to pass 
this locality in safety. He whose negli2;ence renders the place unsafe is guilty 
of a tort. In this particular case the same act of negligence is also a breach 
of the contract between the engineer and the Company. 

170. When an agent commits a tort plainly within the scope 
of his employment, even by the direct orders of his principal, he 
thereby renders his employer liable, but he does not himself 
escape for that reason. His duty to do the right or to refrain 
from doing the w^rong is no less than that of any other individual 
simply because he is some one's agent. 

171. TEST QUESTIONS. — The real test for ascertaining 
responsibility in torts, whether principal and agent, either or 
both, are bound, is : — '' Was the agent acting in the way ordinary 
persons would have acted in carrying out that particular line or 
piece of business?" '' Was he acting in a way which the principal 
could have foreseen w^hen he employed him as his agent?" ''Does 
his contract of employment necessarily imply all that the agent 
in fact did?" If these questions can be answered in the affirm- 
ative, then the principal is liable for his agent's acts. If the 
circumstances fall outside the rules just given, and the act is a 
tort, then the agent is liable, but the principal is not. The 
greatest difficulties in applying the test questions will probably 
be on the question of " scope of employment." (§ § 146-9.) The 
student may also be still further confused by the fact that a case 
may easily fall within the ordinary powers of an agent but not 
within the powers of the particular agent involved. 



92 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §174 

CONTRACT PRINCIPLES INVOLVING TORTS AND AGENCY 

172. INDEPENDENT CONTRACTOR. — An important 

subject which the 
engineer needs to understand thoroughly is that of Independent 
Contractor. The principle may be briefly stated thus : — 

Where one contracts with another who exercises an independ- 
ent calling, trade, or profession, by which the second person is to 
do certain work for the first, — and the second person is not sub- 
ject to the other's control as to the manner of performance, but 
only as to results to be obtained, — then the second person is 
said to be an '' independent contractor,''^ for whose torts (see § 156) 
and those of his servants the employer is not liable. 

It will appear at a glance that this is the status of the person 
ordinarily known as '' the contractor " in engineering circles. 
The fact that there is such a legal relationship, distinct and 
separate from that of agency (see §§132 to 153) is the raison 
d'etre for this whole text-book, and for the courses in " Contracts 
and Specifications " given in engineering schools. It is also the 
fundamental reason why '^ contracts and specifications '' are 
necessary in engineering construction. 

173. We have seen that in a pure agency, the principal has 
complete control and direction of the work in all its details. It 
is also true that by deahng w4th an '' independent " contractor 
owners seek to avoid all the liabihties, risks, and responsibilities 
involved in carrying out their undertakings. In fact the principal 
complexities of engineering contract-writing (see Chapter IX) arise 
through a failure to appreciate and observe clearly the logical 
distinctions between the status of an agent and of an independent 
contractor. For if a contract-writer seeks on the one hand to 
create the status of independent contractor with all its inherent 
advantages for the owner, and by jealously-drawn and minute 
provisions for the control and direction of the work, seeks also to 
secure for his employer all the advantages following upon the 
relation of " master and servant," or simple agency, then his 
path will be an arduous one and strewn with many practical 
difficulties. 

174. Mr. Wait points out that the spirit of nearly every 
engineering contract* is not to make the contractor an agent, nor 
a servant, but par excellence to make him an '' independent con- 

* See Appendix Note 16. "Types of Contracts." 

93 



§175 CONTRACTS 

tractor/* and subject to all the liabilities of such. He further 
cautions engineers to beware of taking too great control of the 
contractor's work even when the specifications are most zealously- 
drawn. Otherwise it is easy for the relationship of independent 
contractor to be changed, waived, modified, or altogether dis- 
pensed with by the acts of the parties. Then, if difficulties arose, 
the law might say, " Now we see the relation of master and ser- 
vant, merely, and the ordinary rules of agency will apply." Hence 
it may be seen that the path of him who writes specifications 
( § § 448 et seq.) is always narrow, often rough, and frequently 
obscure. 

175. To add to the perplexities, it is the general rule of 
law, aside from engineering (which of course forms no exception), 
that the test-question is, " Who has control of the work?" If 
it is the contractor himself who handles all the administrative 
details of management, it will be well. But yet, in important 
specifications we frequenth' see minute provisions for the duties 
and privileges of the engineer governing the conduct and control 
of the work. In nautical phrase, such specification writers are 
sailing extremely close to a lee shore. A more extensive dis- 
cussion of the problems met in contract-writing wiU be found in 
Chapter IX.* 

176. IMPORTANCE OF DOCTRINE TO ENGINEERS. — 
We have sought to show, heretofore, that the spirit of the whole 
body of Agency law is found in the classic maxim, '' Qui facit per 
alium facit per se," meaning, *' He who acts by another acts him- 
self." This proposition has a w^ide scope and often furnishes the 
solution to complicated questions of agency. Instances are 
common where accidents have happened through smnc one's 
negligence, as on construction work done by a contractor. The 
latter would perhaps be only too glad to lay the responsibility on 
the owner, or his agents, while the owner in turn will try to show 
that the tort arose through the " independent " contractor. The 
independent contractor doctrine is evidently sound and just, and 
is thoroughly established. The engineer who tries to write the 
contract and its specifications so as to stand upon both sides of 
the high fence dividing servants from contractors (as already 
noted, see § 174), is the man who is in an awkward position. 

♦See Wait, Enp:. & Arch. Jurisp., Arts. 651-58, incl. for an elaborate 
treatment of Independent Contractor. 

94 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §178 

177. EXCEPTIONS TO THE RULE. — On a preceding 
page the basic rule was laid down that for the torts of an independ- 
ent contractor the principal is not liable. Though this is true, 
yet an engineer should know that the rule has important quali- 
fications. Suppose Y, a contractor, is employed by X, a land- 
owner, to construct a sewer across Z's adjacent land, though X 
has no right whatever so to cross Z's land. Can X excuse him- 
self from damages on the contractor doctrine? Plainly not. 
Thus exception (1) : If X employs Y, a contractor, to do that 
which damages Z, X is liable. It appears that Y may be liable 
too, if the act was a tort in itself, as previously stated. 

Again, suppose Z is a maker of transits. His shop is near X's 
land ; in the shop an extremely dehcate dividing-engine is mounted 
on a masonry pier carried to bed rock. X engages in building 
operations on his lot, and is obliged to use heavy charges of ex- 
plosive in the same ledge which carries Z's pier, injuring the pier 
and the dividing-engine seriously. Can X shield himself behind 
the contractor doing the work, when Z sues him for damages? 
No, this would clearly be inequitable. Hence, exception (2) : If 
X employs Y to produce a given result, and the only means 
thereto are necessarily injurious to a third person, X is then liable. 

Further, suppose you are a surveyor with wide experience and 
high reputation, by reason of which Z brings you work which is to 
have your personal attention. To avoid delay through press of 
business, you turn the work over to Y who is a skilful surveyor, 
but of lesser reputation. You release all control of the work, and 
merely look to him for results. Through a gross blunder, an im- 
portant line is wrongly established, your client suffers serious loss 
and thereupon sues you for damages. Are you shielded by Y? 
This illustrates exception (3) that ^' If X is under a duty to Z 
and employs Y to perform it, X is liable for Y's failure." 
(Mechem, Agency, Sees. 747-8.) 

178. WAIT, ON INDEMNITY AND INSURANCE 
CLAUSES. — The foregoing gives point to the remarks of Mr. 
Wait under " Indemnity Clauses," showing certain present-day 
tendencies producing great hardships to the contractor. 

"It has been the practice to make him liable for injuries to persons and 
property resulting from his operations in the erection of structures; also to 
make him liable for acts of negligence of himself and employees. Ordinarily 
the indemnity should be limited to the willful, negligent, and malicious acts 
of the contractor. He should not be liable to the owner for personal or 

95 



§179 CONTRACTS 

property damages of other persons which are the natural results of the under- 
taking, and could not have been avoided, even with the exercise of due care 
by the contractor." 

" Under the general clause making the contractor liable for the misconduct 
of himself and employees, engineers and their employers have undertaken 
to shift upon him damages and injuries of every kind and from whatever 
cause. In one case a municipality endeavored to hold a contractor respon- 
sible to a mill-owner for diverting water from a stream into the intercepting 
sewer being built. The damage was not in any way caused by negligence or 
misconduct of the contractor, but resulted necessarily from the undertaking. 
It was held that the city, only, was liable." 

This case will be seen to fall under exception (1) on the pre- 
ceding page. " The modern tendency seeks to make the con- 
tractor an insurer against all possible risks arising during con- 
struction, and also to make him assume responsibility for the 
results of erection, completion, and operation of the works under- 
taken. If it is the intention of the parties to have the construction 
contract one of insurance also (or indemnity) it should be made 
very clear to the contractor that this is desired, when he in turn 
may add the necessary premium rates to the regular price of the 
work. And it is not to be expected that such premiums will be 
small."* 

He further says that the questions as to what creates the 
relation of master and servant, and what is necessary to establish 
the status of independent contractor, are often difficult to deter- 
mine. " There is irreconcilable conflict in the decisions, and no 
general rule can be laid down. Each case must be decided upon 
its own peculiar facts. This is certain, however, that the respon- 
sibility grows out of, is measured by, begins and ends with, the 
control of the parties doing the injury. If it is the owner's duty 
to control them in what they do, he is responsible for their neglect ; 
but if this is not so they are not his servants. An exception is 
where by subsequently adopting and sanctioning these acts, he 
renders himself legally a participator in them." " The one who 
stands in the relationship of master to the wrongdoer is liable, — 
he who had selected him as servant, from the knowledge and 
belief in his care and skill, he who could remove him for miscon- 
duct, and the one whose orders he was bound to receive and obey, 
— this is the person who should be responsible." 

179. Relation to Contract- Writing. — ''In drafting an en- 
gineering contract great care must be taken to leave the mode 
and manner of performing the work, the houi*s and the days 

* Waddell & Wait, Spec, and Cont., p. 159. 

96 



AGENCY, TORT, AND INDEPENDENT CONTRACTOR §179 

that the work shall be carried on, the means by which it is to be 
executed, and the persons by whom it is to be done, to the con- 
tractor. If by the terms of the contract the owner or employer 
retains the power to select and discharge the workmen, and can 
control them in the discharge of their duties, can hold them 
responsible and direct them as to the mode and manner in which 
they perform their duties, they may justly be regarded as agents 
and servants of the owner or company, and he (it) is responsible 
for their misconduct and negligence. (126 N. Y. 105.) 

" The fact that a contractor is paid by the job does not make him an inde- 
pendent contractor if he is at all times subject to the control of the owner 
and works in the manner the employer directs, and emplo3's such men as the 
owner directs. (68 N. W. Rep. 46.) When one undertook to complete a job 
that had been abandoned by another contractor, and was to receive the cost 
of labor and materials furnished, plus ten per cent additional, he was held to 
be an independent contractor and not a servant. 

" The character and difficulty of engineering works render it 
desirable that the owner should retain a general direction and 
supervision of the work, and the courts have permitted this 
to a greater extent, probably, than in any other business." (Wait, 
Eng. & Arch. Jurisp. Sees. 652-9.) 



97 



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98 



QUESTIONS 

Questions, Chapter IV 

AGENCY, TORT, AND INDEPENDENT 
CONTRACTOR 

1. Define the relation of agency. Who may he an agent? 
Agency proved how? 

2. Distinguish between " attorney in fact " and agency by impli- 
cation. 

3. Define " implied authority " of an agent. What is the test? 

4. What burden is on him who deals with an agent? Agency 
created how? 

5. What is the rule as to delegation of authority? How modified 
in engineering work? Why? 

6. How can you tell whether or not authority may be delegated? 

7. In agency what is the doctrine of liability by " holding out "? 

8. What defines the extent of an implied agency? 

9. Define ratification. When may an act be ratified? 

10. Who cannot ratify? Why is this? Illustrate. 

11. What are the essentials of ratification? Why must some 
ostensible principal be specified? 

12. Outline the doctrine of '^ undisclosed principal.^' What 
is its object? 

13. Explain assignment of contracts. Why are safeguards 
required to restrict it? 

14' What is the fundamental rule as to assignments? Effect of 
an assignment? 

15. What is the first test question as to scope of an agent's 
authority? 

16. What is m^ant by incidental powers? What is the part 
played by custom and usage? 

17. When may powers not expressly given nor conferred by cus- 
tom and usage be implied against the principal? 

18. What quality of service does an agent owe his principal? 
Illustrate. 

19. What are the agent's duties as to handling money and giving 
notices relative to his agency? 

20. What is the rule as to instructions, secret or otherwise? 

21. When is an agent responsible to third persons? 

22. Suppose an agent misrepresents the extent of his authority, — 
what result? 

99 



CONTRACTS 

^3. How may an agent always relieve himself of responsibility? 

24. Name some of the duties which an engineer performs as an 
agent. 

25. When a professional man contracts for employment, what 
does he warrant to be true? 

26. With what errors and results is he chargeable? 

27. What does he not warrant in such a contract of employment? 

28. State briefly your conception of the common law; of the 
" unwritten" law. 

29. What is the relation between common law and statutes? 
Their relative weights, and the applicability of each? 

30. Distinguish between torts and contracts. What are the 
" natural rights "f 

31. What is m^ant by " proximate cause "? Give an original 
illustration. 

32. Explain '' justification " in tort. 

33. Illustrate the rule that inevitable accident may serve as a 
justification. 

34. Recite upon contributory negligence. 

35. Name the three leading ways in which a tort m^y be dis- 
charged. 

36. Explain meaning and effect of the Statute of Limitations. 

37. Define trespass. Is there more than one kind? If so, illus- 
trate. 

38. What is a nuisance? What is the basis of the tort? 

39. Define negligence. Who determines its existence in a given 
case? 

40. What are the test questions for the detection of negligence? 

41. What are some of the engineer's duties as to negligence? 

42. What are the principal sources of liability in tort? 

43. Give an original illustration of a tort arising through instru- 
mentalities. 

44' Summarize the statements in reference to electrolysis. 

45. For what torts is a water company liable? What reasons 
for your answer? 

46. Explain carefully what is meant by *' respondeat superior." 

47. What are an agent's responsibilities with reference to torts? 

48. How will you tell whether the principal or agent, or both, 
are liable in tort? 

49. What is embraced in the phrase " Scope of employment "? 

100 



QUESTIONS 

50. What is an " independent contractor "f 
61. Explain the relation of independent contractor doctrines 
to this text and to this course. 

52. Wherein are the principal difficulties in engineering con- 
tract-writing? How do they arise? 

53. What is the difference between the responsibilities of a ser- 
vant or an agent, and of an independent contractor? 

54. What is the aim of all engineering contracts? Give reasons 
for your answer. 

55. How may an engineer inadvertently waive the rights of his 
employer when dealing with a contractor? With what results? 

56. What is the test for determining whether one is an independent 
contractor, or a servant? 

57. What one principle underlies the whole body of agency law? 

58. Give an instance where an employer will be liable for the 
acts of an independent contractor. 

59. Suppose a contractor employs methods necessarily injurious 
to a third person. Who must settle for the damage done? Why? 

60. State the third exception to rule of liability of independent 
contractor. 

61. Summarize Mr. Waifs remarks under " Indemnity 
Clauses. '' 

62. What can you say about treating a, construction contract as 
one of insurance? 

63. Is one who works '' by the job " an independent contractor? 
Discuss the general aspects of such a situation. 

64' How is the independent contractor doctrine regarded in 
engineering jurisprudence? Why is this? 



101 



CONTRACTS 

General Review Questions and Problems on 
Chapters I -IV 

1. A is the purchasing agent for the city of M. and in his own 
name makes a contract with X for a car-load of sewer pipe, X being 
unaware that A is such an agent. Upon learning of the agency he 
(X) concludes he should have charged more. Can A enforce the 
contract? Why? Is this a case of undisclosed principal? 

2. A' is the agent of S and has extensive dealings with X in this 
capacity. A is discharged by S but continues to deal with X as 
though he were still S's agent. What are the rights of the parties 
under such a contract? 

3. P is the owner of several plants for the making of concrete 
blocks and A is placed in charge of one, with instructions to hire 
30 men only. He does in fact hire 33. Who should pay the wages 
of these three workmen? Why? 

4. {a) A was paid in advance for high carbon steel of a specified 
quality, which he was to ship to B as soon as it could be made. Upon 
receiving the metal B tested it and found that it was not up to speci- 
fications. Therefore he refused to accept and sued for a return of 
the purchase price. Should he recover? (b) Suppose the metal 
to have been shipped by sea, by the S. S. Line named by buyer, but 
that the vessel was wrecked, and the cargo lost. In case B sues for a 
return of his money, should he win? What facts must he establish? 

5. Suppose that the charter of a city provided that all contracts 
relating to the construction or repair of streets should be made by the 
Board of Public Works only. A, who owns an asphalt repair 
plant, is engaged by the City Engineer to patch numerous street sur- 
faces. 

(a) Can A recover as per the agreement made with the Engineer? 
Why? 

(b) Suppose A has spent a large sum in doing the work, do you 
think he can recoup himself in any way? If so, how? 

6. Enumerate the essential elements of fraud, and tell why each 
must be found to establish a suit for damages. 

7. Name the classifications under " Unreality of Consent " as 
affecting contracts, and indicate briefly the circumstances where each 
arises. 

8. When will inadequate consideration invalidate a contract? 
Illustrate. What is the position of the courts in this matter? 

9. A agreed to plaster B's house, but before completing the job 
the house was completely burned. What are A's rights? Discuss 
briefly. 

10. A pays B $800 for a narrow-gage dinkey engine in the 
belief that it is standard gage, which alone is suited to his purpose. 

(a) Can A recover the money, and if so, tipon what grounds? 

102 



QUESTIONS 

(b) Suppose B had intentionally concealed the fact of gage. 
What result? 

{c) Suppose B had innocently failed to state the gage, assuming 
that " of course " A knew. How do the parties statid? 

11. Cite four examples of contracts opposed to the common law, 
and discuss briefly and in a general way the topic of ^' Illegality.'* 

12. {a) A agreed to pay $1,000 for a patent which B was about 
to take out, but B died before it was perfected. Can B's estate force 
A to pay the $1,000? Give your reasons in answering. 

(b) Suppose A had paid the money in anticipation, but B died 
as above. Can A recover the money? State carefully why or why 
not. 

13. Give an illustration of technical misrepresentation in 
making a contract. Tell its exact effect upon the contract. 

14. Name the four essentials to a valid contract, and recite as 
far as possible upon the topic " consideration.^' 

15. " Qui facit per alium facit per se," — Translate, and recite 
upon it. 

16. When a contract is made with an agent, what precautions 
must be taken? 

17. What is meant by a '' void contract "f Explain " void- 
able." 

18. An important witness in a lawsuit is offered $500 to stay 
away during the trial, and does so by leaving the State. Later he 
seeks to enforce the contract against the attorney who made him the 
offer. Can he recover? Give reasons. 

19. When is an express contract completed? Is the rule of 
universal application? 

20. A contracting company has built a large dam with the under- 
standing that a manufacturing company will buy it and the water- 
privilege upon completion of dam. The price is to be $10,000, but 
after com^pletion, though before any papers are passed, the dam is 
carried away by a phenomenal freshet. Builders sue Mfg. Co. 
for $10,000. Can they recover? Why? 

21. What is an acceptance, when necessary, and how made? 

22. In your contractual relations with * * * * College, state 
what the consideration is on both sides. 

23. An offeree writes, in respect to a previous offer, " I accept 
your terms, but etc." Is there a contract made? Why? 

24. A contractor agrees to build a wall of reinforced concrete, 
as per plan, furnishing all materials. Later he refuses to furnish 
steel rods enough, because of their high price. Upon your objection, 
he finally agrees to fiitish up as per contract if you will give him 
$50 for the last rods, which you say you will do. Upon completion 
he sues you for the extra $50. Can he recover? Why? 

103 



1 



CONTRACTS 

25. Into what class of contracts will your relationship /c) * * * 
College fall? In this contract, point out the offer, and state the facts 
that constitute the acceptance. Analyze the situation and show the 
facts, acts, or iniplicatiojis which go to make tip the mutual promises 
or consideration. 

26. A contractor, wishing to secure a large paving contract, 
offers to pay his competitors $100 each if they will refrain from bid- 
ding, which they do. Later they sue him upon this agreement. Can 
they recover? Why, or why not? 

27. Tell what you understand by " mutual promises." 

28. What is meant by '' liquidated damages "f 

29. What is the object of the abrogation or cancellation clause in 
a contract? 

80. " Lex loci rei sitae," — Explain carefully. 

31. State the gist of a proper payment clause in an engineering 
contract. 

32. In what way may alterations be made in a contract? 

33. What is the status of a contract m^e with an unauthorized 
agent? 

34' What constitutes an " express " contract? 

35. What is meant by " damages " under a contract? When 
are they recoverable, and by whom? 

36. What is meant by a gratuitous promise? Illustrate. 

37. A writes to B offering to sell him 50 barrels of tar for water- 
proofing at $2.50 per barrel. On the same day, but in ignorance of 
this offer, B writes A saying he is in the market for 50 barrels tar, 
and that he is willing to pay $2.50 per barrel for it. Without further 
steps, is there a binding contract between them? Was there an offer 
and acceptance, and a genuine '^ meeting of tlie minds "? 

38. A mails a letter to M accepting an offer from him,, but a few 
hours later, finding that the contract will not be advantageous to him, 
A sends a telegram witJidrawing and declining the offer. Can A be 
held to the contract? Look at this in connection with the Massa- 
chusetts rule that the acceptance must be received by offeror to be bind- 
ing, and note that the tele grain is received before the letter, (b) Con- 
sider the case as occurring outside of Massachusetts. 

39. A makes an offer and in it states that an acceptance is to be 
mailed but that it shall not be binding until it is received. Is such 
a condition binding? Does this appear to be a valid condition prec- 
edent, and if so, what is its effect? {130 Mass. 173.) 

40. A offers to sell a certain piece of land for $1,000. B makes 
a counter offer to purchase for $750, but A declines tJiis. Later B 
changes his mind and concludes to accept A^s offer to sell for $1 ,000, 
but now this is declined by A. Has B any rigJit against A by which 
he can make A accept? 

104 



QUESTION'S 

41. Define " Negligence J' 

42. How does liability for torts arise? 

43. What objects are sought in developing the '' Independent 
Contractor " doctrine? 

44' What is the fundamental maxim of the law of agency? 

45. Define '' proximate cause J^ Where and when is the rule 
applied? 

46. What is " Ratification "f 

47. What law governs a contract? 

48. What are dominant and servient estates? 

49. How may a contract be discharged? 

60. What is the difference between express and implied con- 
tracts? 

51. What is meant by ^^ condition precedent'^? Its relation to 
the contract? 

62. A and B have the boundary line between their lots sur- 
veyed and marked. They acquiesce in the line. Five years later 
A finds that by a mistake the line was located so that his lot is five 
feet too narrow. Can he have the line changed? 

63. A contract provided for erecting an apartment house 180 feet 
high for $60,000. The striictiire was completed, but while $10,000 
were still due on it, a statute was found forbidding the erection of 
any building over 160 feet high. Thereupon the owner refused to pay 
the balance. What were the contractor's rights? 

64' What are the leading grotinds of illegality to be avoided in 
making engineering contracts? 

66. Explain carefully how custom is a source of law. Can you 
tell why this is true? 

66. Discuss adjudication of former cases as a source of law. 
Why is this practice useful and necessary? 

67. What is a statute? By whom made? 

68. Explain what is meant by delegation of authority? When 
permissible? 

69. Is contracts a common-law or statutory subject? Give your 
reasons. 

60. Suppose you are authorized to say that a building contract 
is properly performed. Can you bind the owner by adding certain 
terms to the contract and getting them performed by the contractor? 
Tell what principles are involved. 

61. (a) Suppose a traveling salesman is employed to visit the 
trade in outlying districts, and hires a team to transport himself from 
place to place. Is the firm chargeable with the livery bill? Why, 
or why not? 

105 



CONTRACTS 

(6) State carefully the principles involved here, tell what sort 
of contracts were made, if there were any. 

62. Discuss the phrase, " The unwritten law^ 

63. How is an agency created? Who may he a principal, and 
who an agent? 

64. " Time is of the essence of every engineering contract," — ex- 
plain carefully the meaning of this phrase. 

65. A Steamship Co. enters into an agreement with X & Co., 
coal dealers, for supplying them with coal for its vessels dttring the 
year. They receive coal from January 1 to August 1 of that year, 
when the S. S. Co. sells its vessel and refuses to take any more coal. 

(a) Can X & Co. make them take the coal for the rest of the year? 

(b) Can X & Co. recover damages, and stop delivering? 

66. Suppose you are running a surveying office, and while 
working on Broadway a rimaway horse knocks over your transit, 
causing $50 damage. It appears that your instru^nent-man was 
negligently at a distance from the transit at the time of the accident, 
and was otherwise engaged on his own matters; that the horse was 
hitched to an ordinary drop-weight tised by grocers^ m,en; that he was 
frightened by a particularly noisy automobile driven with reckless- 
ness by A, the chauffeur of P. What are the remedies of the respec- 
tive persons? 

67. J sued a R.R. Co. for injuries sustained by reason of a 
defective bridge. A R.R. Supervisor had heard of the defect, a mere 
rumor, but negligently omitted to either verify the rumor or report 
to the company. Can J recover damages? Reasons? 

68. Give the leading rules as to responsibility in tort. Illus- 
trate what is ineant by " instrumentalities.'' 

69. S was awarded damages from a gas company for injuries 
due to an explosion due to a gas- leak. The gas company in turn 
sues an Electric Railway Company claiming the leak was due to 
electrolytic action tipon their pipes by stray currents frcnn the railway. 
Should they recover? 

70. Referring to contracts, what is m.eant by " waiver "f 
" Breach,'' — tell what it is, the questions presented, and its effect. 

71. P owned and wished to dispose of an automobile in which 
there was a serious defect. He instructed his chauffeur to sell the 
machine, and after carefully explaining the defect told him to point 
it out to the purchaser. The chauffeur sold to T, not only omitting 
to disclose the defect but representing that the machine was perfect 
and in first-class condition. Can T do anything about the matter? 
What, and why? 

72. (a) A writes to the Universal Cement Co. saying he will 
take 100 barrels of their cement at $2.50 barrel. Is there a contract? 
Why? 

106 



QUESTIONS 

(b) Suppose that previous to this the Universal Co. had quoted 
him with price $2.70 per barrel. Is there a contract now? Why? 

73. A offers by letter to sell a hoisting-engine {second-hand) 
to B for $400. B replies that he will give A $400 for the engine if 
he will first put it into thorough repair. Was there a contract? If 
not, why? 

74' X telegraphs to Y to ship him a 100 k-w generator at once. 
Later in the sam^e day he telegraphs withdrawing the order, but the 
second telegram, is so delayed in transmission that the dynamo has 
been forwarded. Can Y make X take and pay for the machine? 
Give your reasons. 

75. A, who is a lumber dealer, contracts to deliver a cargo of 
lumber on board a certain vessel within ten days. He began the 
delivery but a sudden heavy frost made it impossible to navigate the 
canal by which the lumber came from the mills to the shipping point. 
For this reason the cargo was delayed 20 days. Does this delay 
render A liable in a suit for damages sustained by reason of it? 
Give your reasons fully. 

76. C gives a bond for $5,000 as a guarantee that B will faithfully 
perfonn a contract. Later B and the owner agree upon a more 
expensive design and change the plans without consulting C. Fin- 
ally B fails to fulfill his contract. Will C be held liable? Discuss 
the situation. 



107 



Chapter V 
REAL PROPERTY 

This chapter defines the general term "Realty," its subdivisions into Land 
and Water, and the degrees of ownership which a person may have in 
each, including a brief discussion of the rights in subterranean and surface 
water, water courses, and in "fixtures" to land. 

Then the nature of the various "estates" in land is sketched, — as 
fee simple, life estates, easements, etc. An outline is given of the methods 
by which title to land may be acquired, — as by prescription, adverse 
possession, deed dedication, and eminent domain, — and the contractual 
elements underlying the acquisition of title are emphasized, when they 
exist. 

The underlying purpose has been to select topics important to the 
engineer substantive!}'-, and which will assist him to more fully under- 
stand his relation to the law of Real Property when he is a party to a 
contract which has reference to it. Thus Deed Descriptions, their inter- 
pretation, and the Duties of the Surveyor in relation thereto are carefully 
considered, as well as the privileges of municipalities as to their water 
supplies and sewage disposal, the practical burden imposed by the rule 
of "Lateral Support," etc., etc. 

An engineer's duties frequently cause him to deal with the 
property of others, hence familiarity with a few definitions and 
principles pertaining to property may assist the student or 
engineer better to appreciate the significance of his acts. It 
may also stimulate his interest to a further inquiry into the law 
of a subject so fundamental to society, since ownership in land is 
obviously the source of all wealth. 

180. LAND. — At the outset it is to be noticed that property 
is of two general classes : 

(a) Real estate, real property, or realty, all comprised under 
the general head, '' Land " ; and 

(5) Everything which is not land is, in general terms, personal 
property, personalty, or a chattel. 

This is but a very broad classification, however, and various 
other intermediate property rights exist between these two, but 
they cannot be- discussed here. Speaking generally, " land " 
includes the surface of the earth, with all above and beneath it. 
When one is the owner of land he owns everything from the 
center of the earth to the highest heavens, unless other estates 
have been created lying above or below his. Thus, one might 
possess land and reserve the right to till its surface, selling the 

108 



REAL PROPERTY §182 

coal beneath it to another person, and the right to the petroleum, 
or gas underlying the coal, to still a third person. 

181. MATERIALS OF CONSTRUCTION. — By an appar- 
ent anomaly, everything fixed or firmly attached to the soil is 
'' land,'* — as houses, structures, fences, trees, foundations, etc., 
etc. But things which are capable of being moved, or carried 
away, are personalty, or chattels. Thus building materials, — as 
stone, sand, lumber unattached to the soil or to any structure, — 
are personalty, though they become realty when built into some- 
thing. Again, while a growing tree or other product of the soil is 
realty, when it is cut down or detached from the soil it is per- 
sonalty. Ice cut from ponds or rivers, and soil dug up to be used 
elsewhere, are personalty, and this is also true of minerals and 
metals, which are realty while they remain imbedded in the earth. 
And so, too, coal, oil, petroleum, percolating waters, and natural 
gas, while in the earth are realty, but when released or brought 
to the surface they become personalty. 

The distinction between realty and personalty is far from be- 
ing an academic one, however, since the whole body of law with 
reference to each of the two is radically different. 

182. TRADE FIXTURES. — To be a '' fixture " the article 
must be annexed to the land (or building, etc.), and the manner 
of doing it must be taken into account. So must the relations 
of the parties affixing be considered with reference to the parties 
owning the estate, the use of that part of the building where it 
was annexed, and the intention of the parties doing it. This rule 
shows why many cases hold that if an article cannot be removed 
without injury to the remaining estate, this shows the intention 
of the parties better than anything else. The rule also shows 
why there should be more indulgence between landlord and 
tenant than between grantor and grantee. (See § 216.) There- 
fore if a tenant erects expensive structures for carrying on his 
business which cannot be removed without injury to the premises, 
yet that is no reason for supposing that he intended to give them 
to his landlord. If a machine, for example, is fixed to the realty 
in order to be stable for its ordinary uses, and is securely fastened 
for that purpose only, then it is personalty notwithstanding such 
fixation. 

This subject of '' Fixtures " has provoked much litigation. 
Suppose a man bought a tract of land upon which was erected 

109 



§183 CONTRACTS 

a steam saw-mill, among other things. No specific mention is 
made of the mill in the deed which conveys the land. The seller, 
before delivering possession of the land, removes and carries 
away the boiler and engines, though they may in fact have formed 
the principal part of the subject matter of the transaction. The 
seller claims the right to remove this machinery, saying they were 
trade fixtures. The buyer claims otherwise, because of the 
general rule that anything attached, or built into, or upon, the 
ground is realty. Thus the ownership of several thousand 
dollars^ worth of property wiU hinge upon the proper definition of 
*' realty." 

183. WATER. — Though it is a species of real property, 

water is not in general the subject of such 
exclusive ownership as is land. We shall now proceed to discuss 
several illustrations of this fact. 

Persons who own land along a stream — abutting on it — do 
at common law respectively own the land beneath the stream, 
to the center-line or " thread " thereof. (There is an exception 
to this if the stream is navigable, or the tide ebbs and flows in 
it.) But even though the land and the water are inseparable, 
in such a case, such owners can only make such use of the water 
as will serve to gratify their ordinary wants, since the owners 
of land below them have equal rights to have the water in the 
stream come to their lands substantially undiminished in quantity, 
and not materially altered as to quality. 

184. Such parties as we have just been discussing are called 
'' riparian ownere." A considerable body of law deals with 
riparian rights and ownership, which will be of especial importance 
to the civil engineer and others interested in hydraulic power 
developments, and in boundaries on or near water. Mr. Wait, 
in his work '' Operations Preliminary to Construction, etc.," 
has made an elaborate compilation of cases dealing with the owner- 
ship, use, appropriation, obstruction of streams, etc., to which 
the reader is referred. Only a few cases which seem of particular 
interest to engineers will be mentioned here. 

185. OWNERSHIP IN SUBTERRANEAN WATERS.— 
There are two classifications : 

(a) Percolating waters ; and (6) those having a definite 
channel. 

Percolating waters are held to be the property of him in whose 

110 



REAL PROPERTY §187 

land they are. Hence one may intercept the natural percolation 
on his own land, even though it destroys his neighbor's well or 
spring. It has been argued that this is so because the purchaser 
of land buys in ignorance of the hidden currents of water which 
may be flowing to or from the land ; hence he cannot be supposed 
to have bargained for any right to a secret flow in another's land. 
Thus, for example, a city was held not liable for damage done 
through the building of a sewer by it in a street, though this cut 
off the flow in a spring upon the land of an abutter. 

Definite Channel. — With reference to water flowing in a 
definite underground channel, it has been held that in order to be 
accounted such, the channel should be ascertainable by persons 
of ordinary intelligence and attainments, without recourse to 
digging, or to the testimony of scientists, or experts in geology. 
When so found, the owner of the land under which such a stream 
flows may tap it and make a reasonable use of the water, as may 
riparian owners generally. 

186. Pollution of Underground Waters comes under the fun- 
damental rule of torts (see § 156) that one must not use even his 
own property so as to injure his neighbor. Therefore if he permits 
the percolation of poisoned or contaminated water from his land 
to that of another, he will be liable for the damages done. At 
his peril, he must keep such deleterious materials upon his own 
land. Familiar examples are : Oil-tank seepage, leakage of gas- 
liquors, manufacturing, or chemical wastes, etc., etc. 

Though briefly stated, the logical development of the principles 
just given will furnish the solution to many practical questions. 

187. OWNERSHIP IN SURFACE' WATERS. — Waters 
which have no well-defined channel or banks are known as '^ sur- 
face waters." Natural depressions in the land through which 
surface waters from adjacent lands frequently flow are not water 
courses. Surface waters include those which are diffused over 
the surface and are derived from rains or melting snows, or drain- 
age from the uplands, making wet, springy, or boggy grounds. 
But it will be considered a water course if from time immemorial 
the water from rain and melting snows has accumulated in large 
quantities on the slopes of hills or mountains, and has at regular 
intervals [seasons] descended in clearly marked gullies or ravines, 
carving a distinct channel which shows unmistakable evidence 
of the erosion of water. (Amer. & Eng. Ency. Law.) 

Ill 



§188 



CONTRACTS 



Numerous cases have defined what, in that particular instance, consti- 
tuted a water course. Probably enough has been said, however, to indicate 
that the distinction between a water course and surface water is sometimes 
important. It is suggested that one with the trained intelligence of a civil 
engineer should generally be able to determine the fact when a case arises. 

188. The surface water belongs to him who possesses the land 
upon which it lies, or over which it passes. Hence he may do 
with it as he sees fit. 

An interesting question arises with reference to the flow of sur- 
face water before it reaches one's land. Can it be prevented 
from coming upon the land? In most of the Eastern States the 
common law rule is followed to the effect that a lower owner may, 
at his pleasure, repel or divert surface water from coming upon 
his land. 

From this it would appear that if B, owning lower land, finds it a benefit 
to have the surface water come to him from A's upper land, yet B has no 
redress if A diverts it before it reaches the upper land, thus depriving B of 
the benefits he would derive from the water. 

There is, therefore, a prominent distinction between the 
quality of ownership which may be had in surface waters, and in 
water courses. In the first, the ownership is exclusive; in the 
second it is strongly quahfied. 

189. SURFACE DRAINAGE INTO WATER COURSES. — 
One may drain water from his own land into ditches, and thus 
perhaps increase the flow and accelerate the current discharging 
upon a lower owner. But if the ditching is of a reasonable and 
proper sort, is for the purpose of improving the upper land and 
not intended primarily to injure the lower owner, there can be 
no claim for damages. (81 N. Y. 86.) But as it is universally 
held that the upper owner has no right to collect surface water 
into ditch, drain, canal, or other artificial reservoir and then dis- 
charge it in a volume upon the lower lands, it will be seen that 
the upper owner's rights lie somewhere between these two limits. 
To determine them in a particular instance will be *' a question of 
fact " for a jury. 

190. Rights of Municipalities. — The control of surface waters 
is often a matter of some moment to municipalities. At common 
law (in the absence of statutory or constitutional provisions), a 
city incurs no liability to abutting owners by varying the disposal 
of surface waters in skilfully carrying out duly authorized munic- 
ipal improvements. 

In Minnesota it has been held that the city is not liable for 

112 



REAL PROPERTY §191 

failing to provide sewers to carry away surface water naturally 
coming upon a citizen's lot. And in Massachusetts it has been 
held that a city incurred no liability, even if it prevented water 
from a flooded house-lot from coming into its sewers, though the 
excess of water was a direct consequence of changes of street 
grade in the vicinity. (136 Mass. 119.) New York decisions are 
to the same effect, and probably many others. As the different 
jurisdictions exhibit a variety of views in dealing with surface 
waters affected by act of a municipality, cases contrary to those 
just given may doubtless be found. 

It may seem remarkable to the student that a private person 
can be injured as above indicated, and yet have no redress. The 
reason is probably to be found in pubHc pohcy, — the greatest 
good for the greatest number benefited by the municipal improve- 
ments, — for a municipal corporation, as a great aggregation of per- 
sons, should have more extensive privileges than a mere private 
individual. In cases of this class the element of negligence in 
performing the work is a prominent factor which may give results 
opposite to those given above. The existence of modifying 
statutes on the matter is likely, and has been already noted.* 
(See § 265, Liabihty of Municipal Corporation in Tort.) 

Railroads are also often involved with questions of surface 
water, because of their extensive embankments upon low lands. 
They have much less extensive privileges than municipalities in 
this respect, and are dealt with merely as private individuals. 
If they cause damage by varying the flow of surface waters they 
are responsible for it; but this rule like every other principle of 
the common law, is susceptible of frequent changes by specific 
statutes. 

191. WATER COURSES. —As has been said, the owner of 
land on a natural stream has a right to have the water come to 
him substantially unimpaired as to quality and undiminished 
in quantity. If the waters are fouled by the operation of factories, 
mills, or works, the operators are liable in damage suits, or sub- 
ject to an injunction from the injured riparian owners. 

Streams flowing through populous districts with extensive 
manufacturing interests will ordinarily have their waters con- 
siderably polluted, and it is not meant that the purity shall be 
absolute, since this rarely exists even in a state of nature. How- 

*See Appendix Note 11. " Approp. of Munic. Water Supp." 

113 



§192 



CONTRACTS 



ever, any pollution of a stream that renders it unfit for the usual 
and proper uses hitherto obtaining, is a nuisance. It can be 
abated at law, and damages had. What is an " unreasonable " 
pollution is always a question of fact for a jury, and therefore no 
rules concerning it can be given here. 

192. Sewage Disposal Into Streams is important to the engineer 
professionally, since sewage disposal is an engineering specialty. 
From a sanitary view-point it is a vital matter to the community 
generally. Mr. E. B. Goodell, in Water Supply Paper No. 103, 
of the U. S. Geol. Survey, reviews the '' Laws forbidding the Pollu- 
tion of Inland Waters " in a comprehensive manner. He says 
(p. 21), in referring to municipahties : " As riparian owners they 
have the same rights and are subject to the same restrictions in 
the use of water flowing over their lands as private owners. That 
is to say, they may deposit sewage in the water if it causes no 
injury to property below them. And if a statute authorizes the 
construction of a system of sewers to discharge into a specified 
stream, even then there must be no nuisance. If it were other- 
wise, that is, if the lower owners had no redress, the constitutional 
provision against taking private property for public uses without 
just compensation would be violated." 

Mr. Goodell notes that there is beginning to be considerable 
activity in this matter among the law-makers throughout the 
country. The legislation all tends to prevent stream-pollution, 
particularly in the populous districts, though its effect upon the 
pubhc health has only begun to be popularly realized in com- 
paratively recent years. 

Disposal Into Streams After Purification. — In Eng. Rec. 
Vol. 51, No. 5, there is a brief editorial reviewing a decision of 
the Supreme Court of Massachusetts in a suit brought against the 
City of Worcester, based upon its alleged carelessness in purifying 
its sewage. (See also, 72 N. E. Rep. 326.) The decision points 
out that since the benefits of sewage purification are not alone con- 
fined to the residents of the city doing it, but that it also benefits 
a population lying outside its hmits, the State has determined that 
it is no more than fair that those receiving such benefit should con- 
tribute to the expense. The decision also decides that a city 
cannot be held for small nuisances which it may create after it has 
exhausted all reasonable steps to purify its sewage. 

193. Obstructions. — If a city or town negligently constructs 

114 



REAL PROPERTY §196 

or maintains a bridge or culvert across a river, causing the water 
to flow back and injure the land of a private person, it is liable in 
tort. The same is true if it empties a common sewer upon such 
land to the owner's injury. These results are reached not neces- 
sarily because of negligence, but in the first case, at least, because 
of injury to another's property rights outside the limits of the 
public work. 

194. Mill Privileges. — A few old Massachusetts cases will 
be given without comment. A owns a mill, and B owning land 
below him builds a dam which sets the water back to the serious 
interference with A's wheel. A has a right of action against B. 
(9 Mass. 316.) Or if C above A builds a dam for irrigating his 
land, and uses practically all the water for that purpose, he will 
be liable to A. (13 Mass. 420.) But such injuries must be real, 
and not theoretical, (9 Pick. 59.) (See also § 208.) 

ESTATES IN LAND 

195. DEGREES OF OWNERSHIP. — Before attempting 

to show any of the 

relations between the law of contracts and of real property, it 

will be necessary to make a short statement outlining the degrees 

of ownership in real property known as ^* estates." Having 

learned the meaning of a few prominent technical terms pertaining 

to the subject we may then talk intelligently about the situations 

wherein they arise. 

*' Estate " is a word with a distinct technical meaning, and 

signifies the degree, quality, nature, and extent of one's interest 

or ownership in land. 

The term should not be confused with the use of the word in ''real estate," 
where it is equivalent to ''land," or "land and buildings," and designates 
a physical substance. "Estate" is the name of the "incorporeal" right in 
the land. 

196. FEE "SIMPLE. — When a person is absolute owner of 
land, — in legal phrase, '' the possessor of all legal rights, titles, 
and interests therein," he is said to be the holder of the fee simple, 
or to use the shorter term, the holder of the fee. (A study of the 
origin of this word would take us far back into English feudal 
history, foreign to our present purpose.) To hold a fee means, 
therefore, that no other person whatsoever owns a paramount 
interest in the land, though various lesser estates in it may be 
existent. And if the present owner in fee is not dispossessed by 

115 



§197 CONTRACTS 

action of law, and he fails to make any other disposition of the 
land during his lifetime, it will descend to his heirs. 

We have said that the holder of the fee is the absolute owner 
of the land. The word absolute cannot be compared. It will 
appear, therefore, that the '* fee " is the paramount title to real 
property known to the law. One who succeeds to the title of a 
holder in fee, thus becomes, in turn, the absolute owner. 

197; LESSER ESTATES. — The common law recognizes 
estates less than fee. A familiar example is a landlord renting 
his real estate (be it for a greater or less time) which creates an 
*' estate for years," (or '' at will ") as the case may be. Another 
common case is an '' estate for life," perhaps most commonly 
created in wills. By " life estate " is meant that a certain interest 
of a desired degree or quantity is conferred upon some one, to be 
possessed and enjoyed by that person during his lifetime, and to 
terminate with his death. A " life-tenant," therefore, has no 
power to give away or to sell his interest so as to make the term 
depend upon any life but his own. But he may withdraw his 
rights, and make over the estate in favor of the " remainder- 
man " as the person is called who is to succeed to the fee after 
him. A widow's '* dower " is precisely this sort of an estate. 

From the foregoing it may be seen that the holder in fee can 
convey away any lawful estate of a lesser degree and still retain 
the fee, since the whole is greater than any of its parts. And it is 
equally obvious that if a person possessed of the fee does convey 
a lesser estate, the person taking the lesser estate does not suc- 
ceed to the fee, — a distinction sometimes lost sight of. This 
distinction becomes important when the significance of " reser- 
vations " and '' exceptions " in deeds of lands is under discussion. 

198. EASEMENTS. — Another estate less than fee (some- 
times very small indeed) but about which much is heard is called 
an '' easement." An easement is the right or privilege to use the 
land of another person without giving him any compensation 
therefor. It is a right possessed by the owner of one piece of 
land to use the land of another for a special purpose, only. 

For example, suppose I own a tract of land abutting on a highway, but 
sell the rear half of my lot to another person who owns no land contiguous 
to the piece I sold him. Here the law will imply an "easement of access," 
and whether I mentioned it or not in my deed to him, he would have a "right 
of way" to go out and in across my lot to his, and this he may do even against 
my consent, and still not be a trespasser. It is only proper to saj', however, 

IIG 



REAL PROPERTY §201 

that in such a case most fair-minded persons would have granted this right of 
way in the deed. 

199. Speaking generally, an easement can only pertain or 
attach to land, — it is distinctively a part of the law of real 
property. In the case last put, the buyer's would be termed the 
dominant and mine the servient estate, and two such estates are 
necessary for the existence of every private easement. Further, 
this easement of access would be said to be appurtenant to the lot 
I sold, and perhaps this will sufficiently explain this term, so 
frequently found in deeds. There is a great variety of easements, 
such as the right to the use of a drain ; to use an alley for specific 
purposes ; the right to take ice from a pond ; to have access to an 
ice-house; to have free access to light and air, with reference to 
buildings upon a particular site, etc., etc. 

200. Party Wall. — When engaged in architectural work and 
building construction, the engineer will need to understand the 
easements relative to a '' party wall." This term refers to a 
wall, erected on the line between two adjoining owners, for the 
use of both parties, and resting partly upon the land of each. It 
is frequently built by one owner in advance of the needs of the 
other, and unless there are statutes providing that the expense 
of construction shall be borne jointly, numerous cases have held 
that if only one owner wishes to use the wall, he must bear the 
expense of construction. In such a case, the soil of each owner 
and the part of the wall belonging to him is burdened with an 
easement (or '^ servitude '') in favor of the other owner, to the 
end that it may afford a support for the wall and building of the 
other person. 

201. If an easement is not appurtenant to some piece of land, 
and this is sometimes the case, it is called an *' easement in gross ^ 
A typical illustration of an easement in gross is found in the 
pubhc use, as a highway, of strips from the land of two adjoining 
owners, when such strips of land have not been acquired by deed, 
dedication nor eminent domain, but remain the property of the 
original owners. In such an instance the public is said to have an 
easement of passing and repassing in those particular pieces of 
land. This practice is common in many parts of the country, 
and may give the surveyor trouble, when he is called upon to 
locate the boundaries of a piece of land adjacent to a highway. 
He will avoid trouble on this score if he ascertains from the 

117 



§202 CONTRACTS 

records (1) whether the original owners gave or " dedicated '* the 
strips of land for the highway when it was laid out ; or (2) whether 
the public acquired an easement by long-continued use (see 
§ § 204-7) of the strips in question (in which case, the land in the 
street still belongs to the adjacent owners, one-half to each) ; 
or (3) whether the land for the highway was acquired by pur- 
chase on the part of the town or county, or " taken " by eminent 
domain. (See § 235.) In the first case, the land in the street 
belongs to the public or there may be an easement, merely, accord- 
ing to the language used; in the second case, the public has an 
easement in the land, only, and if the street were to be aban- 
doned, the strips of land would revert to the abutting owners ; 
in the third case there may be a fee taken or the eminent domain 
may refer to an easement, merely. 

202. Creation and Extinguishment of Easements. — It is held 
that an easement can only be created by a deed (see § 214) 
or by prescription, or operation of law. (See §§ 198, 204-7.) 
They may be destroyed, or extinguished in a variety of ways, 
however. Thus, when the estate to which it is appurtenant 
ceases to exist, the easement is destroyed. The same is true if 
there is a " merger of estates,'' meaning that the same person 
comes to own both the dominant and servient estates. An 
abandonment has the same effect, but to be effective, this must be 
more than a mere temporary cessation in using the easement. If 
the easement was created by prescription, when the purpose 
for which it was created ceases to exist, then the easement passes 
out of existence, also. An old Massachusetts case holds, more- 
over, that whether an easement is acquired by a known grant 
or by prescription, it may be extinguished, renounced, or modified 
by a parol license granted by the owner of the dominant estate, 
and executed and carried into effect by the owner of the servient 
estate. (68 Mass. 302.) 

From the foregoing it will be seen that a person who owns 
land subject to an easement has had a slice, as it were, taken out 
of his fee simple. His ownership is something less than that 
major title so named. 

MODES OF ACQUIRING TITLE IN LAND 

203. The title to land may be transferred in various ways 
and three general modes of passing the title will be briefly con- 
sidered, as follows: 

118 



REAL PROPERTY §204 

(a) By an act of a Party, — as Prescription, and Adverse 
Possession ; 

(b) By Deeds, — which are formal contracts ; 

(c) By Operation of Law, — as Accretion, Eminent Domain, 
and Dedication. 

204. ESTATES BY PRESCRIPTION, AND ADVERSE 
POSSESSION. — A topic often closely aUied to easements is " title 
by prescription." But before discussing this topic mention must 
be again made to the Statute of Limitations (see § 161 -[6]), 
which if applied to real estate refers to a period of twenty years 
(or thereabouts, in most jurisdictions). 

By the older common law, one who had a right of action (i.e. 
grounds for a lawsuit) against another person, could not lose it 
by the lapse of time. It will be easily appreciated that these 
facts offered a rich field to imposters who could thus dig up some 
hoary claim aged a century or two, when of course everybody 
who knew enough about the matter to be a witness was long dead. 
There was another positive and great disadvantage in allowing 
the courts to be hampered by a mass of ancient troubles, when 
present current business demanded all their attention. Hence 
as far back as the time of King James I. there was passed this 
" Statute of Limitations of Actions, and for Avoiding Suits at 
Law." The fundamental proposition as it now concerns us, is 
that if a person possessing the fee in land abandons it for a long 
enough period, he loses his title. Though perhaps the incomer 
is a mere squatter only, yet if he holds the land continuously, 
openly, etc., and claims to hold under a right adverse to that of 
the owner, and this condition exists for twenty years (or any 
other statutory period) then the squatter becomes absolute owner 
of the fee by operation of the legal doctrine termed " Adverse 
Possession." 

Suppose, for example, that A conveyed to B by deed a lot 
of land described as " fronting 30 feet on X. Street." The land 
was not measured, but A described it as extending to a certain 
stone, which was in fact five feet from the true corner, and lay 
beyond it. B fenced the land as far as the stone, including the 
extra five feet, and occupied it for twelve years, believing all the 
land belonged to him. 

Then B sells his lot to C, and the deed of sale follows the same 
description as that in the deed which he received from A. C 

119 



§ 205 CONTRACTS 

then occupies the whole premises for ten years. X, who is the 
owner originally adjoining A's land, was in fact owner of the five- 
foot strip all the time. 

Assuming that B can pass on to C as much title as he himself 
possessed, can X now dispossess C? 

It is evident that neither B nor C held the land for twenty 
years ; therefore the question is whether they can add together, 
or '^ tack '' their terms to make up the statutory period. Massa- 
chusetts formerly held this could not be done, unless there was 
blood relationship, as by descent, between B and C. Numerous 
other States, however, have followed the spirit of the law, which 
is to quiet titles, and to cut off the rights of those dilatory in 
enforcing them, and have allowed two such terms to be " tacked." 
Massachusetts, in 1903, fell into line, only requiring that the land 
against which adverse possession was to run should be continu- 
ously occupied as a part of a larger estate. 

205. It is commonly stated that to allow title by adverse 
possession to be gained, it must be open, '^ notorious," avowedly 
contrary to the rights or claims of some other person, and must 
be important enough to give notice to such persons that a claim 
of right is intended thereby, etc., etc. While it is thus very easy 
to recite what shall constitute adverse possession, it is a far 
harder matter to prove, or disprove, its existence in the manner 
required by law. 

206. The important legal principle underlying adverse pos- 
session is often lost sight of by surveyors. They are called 
upon to locate the boundaries of a piece of land as described in a 
deed, and often entirely neglectful of the rights gained by long- 
continued use and possession, and the '^ running of the Statute 
of Limitations " (§ 204), they engender bitter animosities between 
neighbors by assuming that the mathematical basis of the art of 
surveying furnishes the only clue to determining the legal boun- 
daries.* 

The essential principle seems to be that if every pei*son who 
owns land in fee ('' seised," in legal phrase) does not assert his 
title and occupy the land in a manner sufficiently unequivocal 
during a period of twenty years, then his title may evaporate, if 



*Sce ajvaluable article by O. L. Tceple and Ti. S^ Smith, reprinted from 

a ' ' 

1910, 

120 



Wisconsin Engineer, December, liHM), in Engineering-Contracting, February 2, 
L910, on Significance of Adverse Possession to the Survevor. 



REAL PROPERTY §208 

the word is allowable. The superior title has been lost through 

the holder's negligence in failing to assert it effectively- within a 

reasonable time. In popular language, his claim is outlawed. 

"By the long and undisturbed possession of real property, a person may 
acquire a title to it, or a right of ownership superior in law to that of another 
who may be able to prove an antecedent, and at one time a greater title. 
This superior title has been lost by the negligence of the person holding it 
failing to assert it effectively within a reasonable time, as by resuming posses- 
sion to which he was entitled, or asserting his right by suit in the proper 
court." (115 U. S. 620.) 

207. Having now explained at some length the spirit of the 
law beneath adverse possession, the way is prepared for the brief 
statement that acquisition of title by prescription means almost 
the same thing. In fact, title by adverse possession refers to 
the land itself ; while title by prescription applies to some right in 
land, as for example, easements. Long and undisturbed possess- 
sion of a right in land (one which is properly an incident of its 
ownership) may give rise to an easement by prescription ; of this 
there are countless cases in the law books. If the party who is 
even slightly injured in his property rights acquiesces in them 
long enough, and suffers it to continue without objection, the 
Statute of Limitations will cause him to lose his right to apply 
for a legal remedy. The effect is that a prescriptive easement 
wiU have been obtained against him. 

208. Easements Obtained by Prescription. — It has been 
already hinted that in certain instances easements might be 
gained by prescription (see § 207) and the importance of the 
topic will warrant further mention of some of them here. Thus, 
with reference to easements in water, it has long been held that 
the prescriptive right to flow lands by setting water back with a 
dam may be acquired without compensation, if the water is so 
set back for twenty years without objection from the injured land- 
owner. (28 Pick. 141.) And if a mill-pond has not always been 
maintained at its maximum level because of a leaky dam, gates, 
etc., then if the dam is made tight but its crest is not raised, no 
one can claim damages because the water is made higher than it 
was wont to be. (2 Allen 242.) 

The student may reason that if the other land-owners enjoyed the low'- 
water stage for a long enough time, they would acquire a prescriptive right 
to have it remain at that stage. But this is erroneous, since there is a plain 
distinction between seizing upon and actively using a right in another's land 
in derogation of the real owner's privileges, and on the other hand, passively 
acquiescing in a benefit which incidentally comes to one's land by reason of 
the failure of an adjacent owner to fully assert the rights which he possesses. 

121 



§209 CONTRACTS 

209. With reference to the disposal of surface waters, we have 
seen (§ 189) that an upper owner may by ditching drain his land 
into the natural channels even though the amount so thrown 
upon lower lands is materially increased ; but it cannot rightfully 
be drained so as to pass over lands other than those accustomed 
to receive it. This does not mean, however, that the upper 
owner cannot gain a prescriptive right to a new channel over the 
lower land if its owner refrains from objecting long enough. 
(See § 240.) Neither can a city construct sewers so as to collect 
water from a large area, reverse its direction, and then discharge 
it upon private premises to the injury of the owner, — but the 
possibility of such a right being acquired by prescription has 
already been sufficiently noted. Along the same line, it has been 
held that if a Railway Company builds its road-bed in such a 
way as to throw surface water upon adjoining lands, it will be 
liable for damages. Nor has one person the right to erect his 
house in such fashion that the roof water will discharge upon 
neighboring land in an injurious or unusual manner, etc., etc. 
There are many easements which may be acquired by prescription, 
but it is unnecessary further to extend the list of examples. 

210. LATERAL SUPPORT. — Another matter closely re- 
sembling an easement is the right of " lateral support." It is of 
extreme importance to every engineer who begins construction 
by delving in the ground, because it is a physical fact that all land, 
save the hardest rocks, is dependent upon the adjoining soil to a 
greater or less extent for lateral support. That is to say, every 
portion of the soil is supported and held in its place by the soil 
surrounding it. Thus, if you remove the surface of Lot B from 
beside Lot A, Lot A will tend to slide into the hole thus made. 

It is usual to say that the right to have the land in Lot A sup- 
ported in its natural position by the land in Lot B is an ease- 
ment* incident to the ownership of Lot A. To a certain extent, 
therefore, the owner of Lot B cannot do as he pleases with his 
own land. It is held to be immaterial whether or not the excava- 
tion is conducted with due care. If it causes the adjoining 
property to cave-in or to settle, this is a tort (see § 156), and he 
who digs is responsible therefor. 

*By an old Massachusetts case it is argued rather sharply that the right 
of lateral support is not a technical easement for various reasons, wliich are 
summarized in Appendix Note 12, Lateral Support. 

122 



REAL PROPERTY §213 

211. Fortunately for the engineer the law draws a line and 
says the right of lateral support relates only to the land in its 
natural condition. It does not relate to buildings or structures 
upon the land. Nevertheless, the path of the contractor who 
puts down modern, deep, skyscraper foundations close to the 
footings of another high building, — the usual city problem, — is 
an arduous one, though there is a clew to his labyrinth of troubles. 
If he fails to go down deep enough for a proper foundation for his 
own building he will be liable to his own client for negligence, or 
breach of his warranty and undertaking to construct properly. 
And if he does go to the required depth the next lot-owner may 
come upon him for damages sustained in the settlement or worse 
accident that has befallen his building. 

212. It appears, however, that the rule as to "natural condition" does 
come to his rescue considerably. For since the right relates to the support 
of the soil in its natural condition only, it seems that if he takes all reasonable 
precautions for bracing up the next lot, and places sheeting, piling, shoring, 
etc., such as would have been sufficient to support the land alone, he has met 
the requirements of the rule. Then he may notify the next owner and put 
the further burden of supporting the added load due to the building upon 
him. And this is a burden justly imposed upon said owner, it would 
seem. 

But there are difficulties even in case the next owner comes in and shores 
up his building at his own expense. The contractor will probably have 
valuable plant tied-up, there will be the fuss and inconvenience of having 
another gang of men about, not to mention a separate quantity of materials 
to encumber premises probably greatly encumbered already. The average 
contractor would doubtless prefer to go ahead and do all the protective work 
at one time. Then he could properly charge the next owner for the extra 
work done to support the building over and above what would have been 
required to support the soil alone, were it unloaded. Practically, trouble 
would arise in determining how much of the bracing was necessary for the soil, 
and how much for the building. 

Probably the best way would be to make an agreement with the next 
owner defining what was to be paid for by him, and then have his engineer, or 
representative pass upon the sufficiency and character of the protective work 
as put in. But if the contractor foolishly pushes ahead with such shoring and 
bracing as he thinks sufficient, and neglects to consult the next owner, then 
if the building does settle unduly, the contractor will be liable for negligence. 
This would probably extend to making good a whole side of the building, in 
case it falls. 

213. Vertical Support. — When minerals, such as coal, are 
dug from beneath a surface estate, enough material must be left 
to keep the surface in situ, — the surface has an easement for 
vertical support. The result is similar when one person owns 
the lower rooms of a building and another the upper stories. The 
upper owner has a right to support from the division walls of 
the lower part. 

123 



§214 CONTRACTS 

DEEDS 

214. Probably the everyday mode of transferring title in land 
is by a contract of sale. Numerous non-contractual methods 
are elsewhere discussed at length. (See § § 204-7, and § § 232- 
35.) A deed expresses the intention of the parties as to the 
quahty and quantity of ownership that shall pass, and may as 
well be used to create an easement or some of the lesser estates 
as for a fee simple. (See § 196.) In fact a proper study of deeds 
involves several broad fields of law, and the business of '' convey- 
ancing " should be only in the hands of persons well skilled in it. 
Somewhat less learning is requisite, however, for the proper under- 
standing of these documents for transferring title. Every person 
should be familiar with their broader principles, since society is 
made up of but two classes, landlords and tenants. It is pecul- 
iarly fitting that the engineer should be well-cognizant of deeds 
since aside from the acquisition of land by purchase, he is most 
frequently called upon to interpret them in making boundary 
surveys. 

215. ESSENTIALS OF A DEED. —To be valid and bind- 
ing, a deed of land must contain the essential elements of a con- 
tract. The following must also be true : There must be : 

(1) a sufficient writing; 

(2) proper parties ; 

(3) a thing to be '' granted," or conveyed ; 

(4) a sufficient consideration ; and 

(5) a proper and sufficient execution of the instrument, i.e., 
it must be signed, sealed, attested, and acknowledged ; 

(6) a good delivery and acceptance, — the mere writing 
alone is not operative unless coupled with delivery by one party 
and acceptance by the other. This is true of all contracts, also. 

The title is not perfected in the recipient of the deed (save as 
between the parties) until the deed is engrossed upon the Registry 
of Deeds for the county in which the land lies. 

Deeds as a class of documents are of ancient origin, and their common 
language, critically read, shows many allusions to feudal times. Much of 
the terminology, though it is highly archaic, is retained in modern days because 
it is historically certain just what those terms mean. If they be dropped, or 
radical innovations made in the pln-aseology tlie result might be tin-own en- 
tirely in doubt. It is natural, therefore, that if a person has parted with his 
money to acquire a ])articular degree of title, he does not wish to have Jiis 
title experimented with by seriously modifying the old forms of legal expres- 
sion, hoary and musty though they may be. Law stationers also commonly 

124 



REAL PROPERTY . §217 

carry blank deeds with all the formal parts printed thereon, — which would 
tend, to the same result. 

216. PARTS OF A DEED. — Technically, there are num- 
erous component parts to a deed, but those most interesting to 
engineers are probably as follows : 

(a) The PREMISES, containing the names of the parties 
(grantor and grantee), the consideration, and a description of the 
property conveyed ; 

(b) The HABENDUM, which points out the kind or quahty 
of estate conveyed, — whether fee, life estate, or otherwise ; 

(c) The REDDENDUM, which contains the " reservations " 
(i.e. phrases defining what parts of the property described are not 
conveyed to the grantee), if there are any ; and 

(d) The COVENANTS, including that of Warranty, if it is a 
*' warranty " deed. 

As a deed is par excellence a contract, the parties may insert 
such warranties as they see fit. The usual COVENANTS OF 
WARRANTY are: 

1. That the grantor really owns the land he is in the act of 
conveying, and that hence he has a perfect right to convey it (also 
called warranty of seisin) ; 

2. Warranty against Encumbrances, — that there are no 
unsatisfied mortgages, easements, or other burdens upon the 
land (save as specifically mentioned) ; 

3. Warranty of Quiet Enjoyment; 

4. Warranty of Title, — that the grantor warrants (and 
secures both as to himself and his heirs), and will defend the title 
he is conferring against all legal claims made by other persons. 

217. WARRANTY and QUIT CLAIM DEEDS. — The pres- 
ence of this group of covenants forms the distinguishing feature 
between a warranty deed, which is the best possible deed (if the 
grantor is financially responsible), and a '^ quit claim " deed, often 
of doubtful value. Quit Claim Deeds make none of these valuable 
promises (covenants) but merely say that the person making it 
steps down and out, as it were, and the buyer takes the seller's 
rights for whatever they are worth to him, — which may be much 
or little. Frauds are often perpetrated in this way by persons 
having no interest in a piece of land, and possessing no shade of 
ownership whatever. They give a quit claim deed to some 
guileless individual and forthwith depart with the price. Need- 

125 



§218 CONTRACTS 

less to say, the misguided person has purchased nothing but some 
experience. 

This is not to say, however, that a quit claim deed may not be a 
perfectly legitimate one to give, under certain circumstances. 
Indeed it is not uncommon for a grantor to give such a deed 
when there is some slight technical imperfection in his title, but 
which does not practically impair his title to any noticeable 
extent. In such a case, the grantor may justly feel unwilHng 
to assume the severe obhgations imposed by a '' full warranty " 
deed. 

Again, there are persons temperamentally opposed to taking 
any sort of a risk, whatever, and even though they may hold a per- 
fect title, yet they are unwilling to *' warrant " anything, and 
therefore, will only permit themselves to give a quit claim deed. 
It should be noticed, however, that a quit claim assuredly passes 
whatever title its maker had, and therefore, if he holds a fee, he 
will pass a fee. Thus the quit claim deed will be as satisfactory 
as any other under the proper circumstances. 

218. EXAMINATION OF TITLES. — For the reasons indi- 
cated above prudent persons contemplating the purchase of land 
employ a lawyer to examine into the legal sufficiency of the title 
they are about to acquire — a precaution which often saves dis- 
astrous moves. This work is known as making an '' abstract of 
the title " and consists in examining and noting the original con- 
veyance, dating as far back as possible, then scrutinizing carefuUy 
each successive step in the chain of title down to the present 
holder. Thus a number of circumstances or events may make a 
break in the chain, or ^\ cloud " the title, as for example, finding 
unsatisfied mortgages recorded against the land, or parts of it ; 
finding that all the required legal steps were not taken in case the 
land has been partitioned among heirs by order of a Probate 
Court ; finding that the sale of it was not valid in every particular, 
in case the land has been sold on an execution for debt ; finding 
that there are outstanding tax-titles, etc., etc. 

219. DEED DESCRIPTIONS. The purpose of the de- 

scription is to furnish the 
means of identifying the property which the other clauses in the 
deed are designed to convey. Hence deeds are practically void 
and ineffectual for uncertainty if they purport to convey land 
but do not contain any description or designation of it, or if the 

126 



( 



REAL PROPERTY §220 

description is so uncertain that it can not be told what property 
was intended. 

To* engineers, this part of the deed is of most immediate 
interest. An engineer should be able to write an adequate and 
conclusive description of land he is called upon to survey (which 
is a thing many so-called conveyancers miserably fail to do). He 
should also be able to perform satisfactorily the more usual prob- 
lem, namely, to decipher what is really meant and intended in a 
description of land of which he is called upon to locate and mark 
the legal boundaries. 

To do this adequately one needs an intelligent conception of what the 
parties could do, and what they probably meant, or thought they were doing, 
both as a matter of common sense and of law, together with a well-informed 
mind as to the limitations involved, both legal and physical. In fact this 
argument is the whole justification for presenting these outlines of the law of 
real property to the engineering student. For since the lawyer has to measure 
particular instances by broad principles or rules, a person technically trained 
in the sciences may well have his attention drawn to the same leading doctrines 
and principles so far as they relate to his professional work. "An ounce of 
prevention is worth a pound of cure." 

For a practical example of a deed description, and cognate 
matters, the student is referred to Breed & Hosmer's Principles 
and Practice of Surveying, Arts. 149 to 154, including a dis- 
cussion of the judicial functions of the surveyor, rerunning old 
surveys from deeds, etc. 

220. RULES OF '' CONSTRUCTION." — As in other 
branches of the common law, rules have grown up, — necessitated 
by the unskilfulness of those w^ho have undertaken to make legal 
descriptions of land, — directing the interpretation that is to 
be put upon the language used. These rules are based upon the 
soundest public policy and tend to give fixity and permanency 
in the ownership and possession of land. If this institution of 
private ownership in land is allowed to be wantonly or whimsi- 
cally disturbed the very foundations of our civilized society will 
quake and tremble. 

In standard works on surveying, notably Johnson's Theory 
and Practice of Surveying, at Arts. 193-4, there is a cogent dis- 
cussion of this matter with rules for procedure, a few of which 
may be mentioned here. Thus : '' The law presumes the deed to 
have been drawn with an honest intent to convey property." 
The description must therefore be construed, if possible, in such 
a way as to make it effectual rather than void. To the same 
effect, '' In ambiguity due to the language used, the grantee is 

127 



§221 CONTRACTS 

to receive the benefit of the doubt, '^ — a principle we have 
already met. But if the parties have shown by their acts a mutual 
agreement or acquiescence in a certain interpretation of the 
description, this meaning will hold and bind the parties. 

221. Monuments. — See also (same reference) Arts. 302-3 on 
The Value of Existing Monuments and Significance of Possession, 
and Arts. 159-60 on Monuments, Their Significance and Authority. 
The ground is so well covered that it is needless to traverse it 
here. It is a legal principle of broad application that such descrip- 
tions must be construed in the light of what was known to be in 
the minds of the parties at the time it was written, and with 
reference to the monuments or facts then existing. It is well 
settled in Massachusetts that if for a boundary a deed refers 
to a monument not in existence, and the parties later erect such 
monument intending to conform to the deed, such monument 
will govern even though not conforming to the line described 
in the deed. 

222. A much-quoted rule when angles, distances, or areas are 
in conflict, is, '^ The monuments control," — but it is to be apphed 
with intelligence and not blindly. Its basis is so\md, however, 
and is due to the insight of the judges who saw that two persons 
bargaining over the sale of land, having familiarized themselves 
with its boundaries (supposedly), would be more likely to express 
clearly what they meant when describing the boundaries by 
objects (monuments) than would a stranger to the transaction, 
as for example, a surveyor. The surveyor, too, might be unskill- 
ful enough to record a distance as 100 rods when in fact it was 
101 rods. Hence it was in the interests of peace in the body 
politic to let monuments control, instead of measured distances, 
since the principal parties in interest determined the former, 
while a stranger measured the latter. 

223. What Quantity Passes ? — When there is an ambiguity or uncertainty 
as to the quantity of land conveyed, a rule of construction is necessary, A 
principle consistent with the foregoing is that if the lot is described by known 
monuments or other certain descriptions, then the statement of quantity will 
be rejected. 

Thus if the angles and distances in a deed correctly enclose 18 acres while 
the description ends with the words "Containing 24 acres," only 18 acres can 
be taken, if the landmarks or monuments can be positively identified. But 
if on the other hand the quantity was said to be 30 acres while in fact the 
monuments gave the area as 40 acres, the whole 40 acres would be taken 
by the grantee, if the grantor had the right to convey the whole. 

224. GRANT INCLUDES WHAT? — Of practical impor- 

12S 



REAL PROPERTY §226 

tance to the surveyor, engineer and man of affairs is the question 
*' What does a grant include?" Land in its legal significance 
includes not only the soil, and everything that is firmly attached 
to it, as buildings, trees, fences, etc., but also all those incorporeal 
rights, such as easements, which are properly appurtenant to it. 
All these things, therefore, pass in a deed, unless the contrary 
is expressly shown. In general, ownership in land extends in- 
definitely both upward and downward in a vertical plane, yet the 
land can of course be separated into estates horizontally if it is 
so desired. The description in the deed must of course deter- 
mine what is conveyed, but otherwise everything above and 
below the surface passes with it. 

Nowadays, the stringing of wires over land is becoming important. This 
constitutes a trespass if done without the Hcense of the owner, and if he 
does not remonstrate during the statutory period an easement so to use the 
air may be acquired by prescription. 

This principle has been held not to apply, however, in the case of a com- 
pany maintaining poles and wires in a public street. No prescription can be 
gained against the public, in this case. 

225. — Trees On or Near Boundaries. — Neighboring owners of land often 
dispute about a tree on or near the property line. Where the line passes 
through the trunk, the tree belongs to both owners in common, and while each 
may do as he likes with his own, he cannot use nor destroy it if by so doing he 
injures his neighbor's part also. If the tree were blown down by a storm, each 
is entitled to half the wood. 

Where the tree is near the line, its roots penetrate into, and the branches 
overhang the next lot, it has been held that the owner of the trunk owns the 
overhanging fruit, and he may gather it if he can do so while standing on his 
own land. The fruit is still his after falling to the ground though he would be 
a trespasser if he went upon the other land to get it. The adjoining owner 
has the right to cut off the branches which overhang his land if they constitute 
even the slightest nuisance. 

226. DUTIES OF THE SURVEYOR. — In making a bound- 
ary survey it is by no means the surveyor's sole duty to trace out 
the mathematical description of the land from a deed, though 
many young surveyors are of that impression. The problem of 
retracing old boundary lines is not always, nor even perhaps 
usually, to show where they ought to have been in the light of docu- 
mentary evidence contained in deeds, but to determine where 
the lines actually were, whether right or wrong. The doctrine 
of title by Adverse Possession (see § § 204-7, et seq.) is of prime 
importance here.* It is hoped that enough has been said in 
this connection to allow the surveyor to form an intelligent 

*For the student or engineer who desires more fully to inform himself, 
see an elaborate discussion of Adverse Possession, setting forth its various 
phases in different States, its relation to the surveyor's art, etc., referred to 
in footnote to § 206, 

129 



§227 CONTRACTS 

opinion whether, in a given case, the services of a surveyor, or 
those of an attorney and a court of law are required, with the 
surveyor's assistance as an expert witness. In addition to the 
references already given (§§ 219-21), there is a digest of valuable 
matter upon this point, together with the rules for a resurvey, 
in Pence & Ketchum's Surveying Manual, p. 159. 

227. Apparently anomalous situations arise under the above 
rules as to monuments. With the ordinary stone monument, 
distinctive in shape, position, and markings, the surveyor is very 
familiar, and it may not seem to strain the point to call the center 
of a stone wall (which may be several feet thick) also a monument. 
The foundation of a house, or a pile of stones, or a stake, post, 
or a certain blazed tree, also seems proper enough for monuments, 
but one would hardly guess at first that '' another man's land " is 
frequently a monument. Yet such is the case in law, though noth- 
ing whatever marks the position of such '' other man's land." 

Thus a description beginning at a point that can be conclusively located, 
and running thence a fixed distance "to the land of J. S.," carries all the land 
between the starting point and said J. S.'s line, though the measured distance 
falls rods short of it. 

228. When abutters own to the middle of a highway, — a 
common situation where the public has only an easement (see 
§ 201) to pass over the land, — there is a case requiring " con- 
struing." 

Thus, "Beginning on a highway, at such and such a point, thence along the 
same," — means along the center line. Similarly when the "call" begins as 
above, and then leaves the highway, and especially when it runs to the high- 
way, — these words carry title to the center-line of the road, unless there is 
strong language to prevent. 

229. The reason for the apparent examples of unreasonable- 
ness just noted is that the policy of the law is to discourage future 
trouble about these little strips, or fringes of land (probably 
overlooked in the description), by passing them over to him who 
buys the major portion, and to whom (if to any one) they will be 
of most benefit. This is better than to leave them as trouble 
breeders in the hands of the grantors. But in view of the fore- 
going it is not to be supposed that the parties cannot control 
the disposition of these strips and remnants. They assuredly 
can accomplish any desired (lawful) result if they use appropriate 
language, but it must be carefully chosen.* 

♦There is an extensive and valuable article on "Law of Boundary Sur- 
veys," by William E. Kern, in Eng. News, August 28, 1902. The surveyor 
should get much important information from it. 

130 



REAL PROPERTY §232 

230. Street Boundaries. — It has been held in Massachusetts 
that when land bounded by a way, either public or private, is 
granted or conveyed the law presumes it to have been the inten- 
tion of the grantor to convey to the center of the way if his land 
extends that far. Hence a deed bounded by an alley or a way 
carries the fee to the middle and an easement or right of way 
over the other half, if the grantor owned that far. 

231. Water Boundaries. — A class of cases too large to be 
treated here deals with boundaries on water, including streams, 
ponds, and the sea. These become especially important when 
the water is unstable in its position, radically changing its channel, 
cutting away from one owner and depositing material upon 
another's shores (see § 232 Accretion), or causing the formation 
of islands in the stream, etc. 

It is also important to determine what is meant by " Bounded 
on the bank," or *' along the bank," or a description which runs 
" to the bank," or in fact what a '' bank " legally is. For a brief 
statement upon these points also, the student is referred to Art. 
195 of Johnson's Surveying. 

TITLE BY OPERATION OF LAW 

232. ACCRETION. — We have seen that in general when 

anything is firmly attached to land it becomes a part of the realty, 

and title in the thing passes to the owner of the land. Title by 

accretion means the acquiring of title to foreign soil through the 

co-operation of the forces of Nature. Leading examples of this 

are deposits of earth, mud, or silt, upon the slack-water sides 

of bends in river-channels, on estuaries, and on the sea shore. 

In many American rivers this is a very extensive and striking 

phenomenon. The material thus added to one's land is caUed 

ALLUVION. The rule has just been given which determines 

the ownership of this " made " land. 

A highly interesting and not impossible case arises if we suppose that a 
riparian owner, A, loses his entire lot by erosion, and the river just reaches 
the land of B, owning in the rear of A's lot. Then suppose the river freakishly 
"makes" again a large part of A's lot, or at least deposits other materials in 
the place of it. Now, who owns along the river shore? Has the river wiped 
out A's title, made B a riparian owner, and in addition presented him with 
nearly the whole of A's lot? 

Wlien several owners are bounded by a river shore, and land 

is made in front of them, the Massachusetts rule (which seems 

most equitable) is that each owner shall be given such propor- 

131 



§233 



CONTRACTS 



tional part of the new frontage as he had of the old before the 
making. 

233. DEDICATION. — The owner of a large tract of land 
so located that it will be more valuable in building-lots than 
otherwise, frequently " plats " this land. He lays it out into 
as many lots as seems to him expedient, and simultaneously 
plans suitable streets for convenient access to the lots. Upon 
filing the '' plat " at the Registry of Deeds, he usually writes 
upon it language " dedicating " said streets to the pubHc use. 
Hence a dedication is an appropriation of the land to some pubhc 
use, made by the owner, and accepted for such use by, or on 
behalf of, the pubhc. The effect is as though the owner had 
deeded the land to the public, but the formality of dedication is 
employed instead, because " the public " would not be a sufficient 
grantee under the rule requiring " sufficient parties " to a deed 
(which is a contract). 

234. Dedications are of two sorts, statutory', wherein all 
the steps are prescribed and must be substantially followed to 
make the dedication effective; and common law dedication, 
which is much less formal. Here the main features are an 
appropriation by the owner, and an acceptance of the benefits 
conferred by the public. This mode of acquiring title ^\ill there- 
fore be of prime importance to the surveyor in determining 
whether, in a given case, the lot or tract surveyed extends to 
the middle of the street. (See § 201). 

235. EMINENT DOMAIN. — The right of eminent domain 
is the lawful authority which exists in every sovereignty to control 
and regulate rights of a public nature, and to appropriate and 
control individual property for the pubhc benefit, as the public 
safety, necessity, convenience, or welfare may demand. It is 
but a practical application of the ethical dogma '' The greatest 
good for the greatest number." 

This attribute of sovereignty is also generally conferred upon 
railroads and other public service corporations, upon the theory 
(manifestly sound) that such corporations are a direct benefit 
to the public. 

This principle of eminent domain, therefore, provides against an individual 
who is opposed to progress and refuses to sell land for a railroad right-of-way, 
for example. Suppose he owns land that is strategically important for the 
railroad, and seeing a chance to make his fortune, will sell only at an exor- 
bitant price. Thus the largest communities might be seriously hampered, 

132 



REAL PROPERTY §237 

and subjected to inconvenience and loss through the cupidity of a singlegrasp- 
ing individual. 

236. The procedure for obviating such a difficulty is sub- 
stantially as follows: The railroad deposits a bond (though all 
jurisdictions do not require it) for an adequate amount in a court 
of competent jurisdiction, and then enters upon the land. The 
value of the land is assessed by a jury, just as any other jury- 
issue is tried, and the damages sustained by the owner (i.e. the 
market value of the land taken, plus the incidental injury to his 
other property) are paid to him either by the railroad company 
directly, or out of their bond. In the latter case, if there is any 
excess, the balance is returned to the Company. The whole 
business is frequently known as " condemnation proceedings." 

237. Eminent domain may be exercised by a corporation 
only when expressly authorized by the sovereignty. It is an 
inherent power in the Federal Government, and in that of the 
States also, and it may by them be delegated to municipal cor- 
porations. In this category, therefore, are '^ takings " of sources 
of pubhc water supply, places for municipal sewer outlets, for 
pubhc parks, boulevards, etc., etc. The Constitution provides 
that no person shall be deprived of his property without due 
process of law. Taking it by eminent domain is taking it by due 
process of law. 



133 



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134 



QUESTIONS 

Questions for Study and Review on 
Chapter V 

1. What are the two broad classifications in property? 

2. Define ^' land " and tell what it includes. 

3. What is the rule as to articles attached to the soil? Why is 
the distinction between realty and personalty important? 

4. Define a '' trade fixture. ^^ What is the rule as to its owner- 
ship? 

5. What is the noteworthy feature as to one's ownership of water? 

6. What rights have riparian owners to the water in streams? 

7. Classify subterranean waters. What rights has the land- 
owner therein? 

8. Explain " definite channel.'" Discuss pollution of under- 
ground waters. 

9. Distinguish carefully between ^' watercourses " and surface 
water. 

10. What are one's rights in surface waters? 

11. What are the rights of drainage into watercourses? 

12. How may control of surface waters become important to a 
municipality, and what common-law powers docs a city have? 

13. Recite tipon stream pollution by manufacturing wastes, etc. 

14. In general, what are a city's rights of sewage disposal into 
a stream? 

15. What may a riparian owner do when his land is overflowed 
because of an obstruction in the stream? 

16. What facts are brought out under the topic " Mill Privi- 
leges"? 

17. Explain carefully the word " estate." Distingtiish it from 
real estate. 

18. What is the significance of ^' fee simple "? What is meant 
by '' paramount title"? 

19. Name three estates less than fee, and tell how they arise. 

20. What do you understand by an easement? Give examples. 

22. '^ Dominant " and '' servient " estates, — give meaning and 
use of these terms. 

23. Explain the easements relating to a party wall. 

24. What is an easement " in gross "? What is your especial 
interest in highway easements? 

25. Recite upon the creation and extinction of easements. 

135 



CONTRACTS 

SS. In quantity, what is the relation between a fee and an ease- 
ment? 

27. Name the modes of acquiring title in land. 

28. Explain " title by prescription, '' and tell the relation of the 
Statute of Limitations to it. 

29. What situations does the Statute of Limitations provide for? 

30. Outline the doctrine of '* adverse possession.^' Does it 
seem fair to you? 

31. Cite an illustrative case where adverse possession might 
become important to the surveyor. 

32. Recite upon the rule as to continuous occupation. 

33. Explain the difference between title by prescription and by 
adverse possession. 

34. What about the prescriptive right to flow lands? 

35. How does prescription relate to the modes of disposal of 
surface water? 

36. Analyze carefully the easement of lateral support. 

37. How is lateral support related to the average contractor? 

38. How may the situation be handled in putting down '' sky- 
scraper " foundations? 

39. When is the easement of vertical support important? 
4.0. What is a" deed "f For what are deeds used? 

41. Why should an engineer understand deeds? 

42. Name the five essentials of a deed. 

43. Why is their language often archaic? 
44' Name the principal parts of a deed. 

45. What are the usual covenants of warranty? What is the 
deed called which contains them? 

46. State carefully the use and misuse of quit claim deeds. 

47. What is meant by getting an " abstract of title "f Why is it 
done, and by whom? 

48. State clearly the relation of deed descriptions to the sur- 
veyor's work. 

49. Why are rules of construction necessary for interpreting 
deeds? 

60. Mention some of the leading rules of construction. 

51. " The monuments control," — discuss the meaning and 
importance of this rule. 

52. What quantity of land passes by a deed containing a faulty 
description of larid? 

136 



i 



i 



QUESTIONS 

63. The grant includes what? Rule as to trees? 
5Jf.. What things may he designated as monuments? 

55. What points must he carefully noted in interpreting a 
description of land hounded hy a highway? What is the policy of 
the law in relation to such cases? 

56. Recite upon water houndaries. What are the principal 
questions involved? 

57. What is meant by " title hy accretion "f When is it im- 
portant? 

58. Why, how, and for what purpose is land '' dedicated "f 

59. What is the theory and usefulness of " eminent domain "f 

60. The Court gave the following instructions to the jury, 
" When a monument is mentioned in a deed and there is no such 
monument on the ground, and the parties hy consent at the time, or 
soon after, erect and place a monument, intending it as and for the 
monument described, it will he deemed afterwards as if it had heen 
standing at the time, and it m^ust govern, although neither courses 
nor distances, nor computed contents correspond with such bound- 
aries.^' Were these instructions correct? 

61. In a deed a portion of the description is as follows: '* Thence 
Northerly by said Railroad Company's land about 4^6" 2-3 feet to 
the road near the Arch Bridge, so-called, thence Southwesterly by said 
road about 433 feet to stone wall, thence Southerly by said wall.'* 
The wall began on the side line of the street. Does the description 
carry the land to the center of the road which crosses the Arch Bridge? 



137 



Chapter VI 
CONTRACTS OF ASSOCIATION 

An undertaking is too large to be handled by individuals; they do not desire 
a partnership; perhaps thousands are willing to risk something in it, — is 
the status of this aggregation of persons and capital the same as that of an 
individual, or has the corporate entity absorbed the personalities of those 
who compose it? Under Corporations it will be shown that the law of 
contracts permeates the very essence of corporate life, since the cor- 
poration rests upon contracts with the State, with its members, and 
mutually between the members. 

The engineer's understanding of a corporation's powers can only be 
based upon an intelligent conception of the above contracts. He deals 
with a corporation "at his peril," — to what points must scrutiny be 
directed? He buys stock in a corporation, — what are the privileges, 
immunities, and liabilities thereby accruing to him? 

But if a corporation is not desired there is a more ancient type of 
association known as a Partnership. This, too, is pre-eminently a " con- 
tract" subject, since the partners' mutual and public relations rest 
wholly upon the contract between themselves, whether it be express or 
implied. Can the partner bind his associates? What are the liabilities 
of each, and how may they be terminated? How and when may a partner- 
ship be dissolved? These and many other incidental problems will be 
touched upon in outlining the principles upon which these associations 
rest. Since an engineer frequently has to deal with a partnership, or 
joins forces with a colleague and forms one, or may become interested 
in corporations in various ways, knowledge of these principles will be 
valuable. 

CORPORATIONS 

At first glance corporation law may hardly seem to be a 
contract subject, yet the contractual powers of corporations should 
interest the engineer. In outlining these powers it will be neces- 
sary to show certain important characteristics of corporations. 
This being done, many questions of contract will have been 
covered incidentally. It is worth while for the engineering 
student to familiarize himself with the elements of corporation 
law, in view of the vast amount of business done to-day by this 
type of organization. Moreover, the great constructive opera- 
tions upon which engineers are being more and more engaged, 
can only be undertaken by aggregations of capital in corporate 
form. 

238. DEFINITION. — A corporation is a collection of in- 
dividuals united by authority of law under a special name, with 
the capacity of perpetual succession and of acting in many re- 
spects as an individual. It is regarded as a distinct legal entity, 

138 



CONTRACTS OF ASSOCIATION §240 

existing only in contemplation of law, and by virtue of the opera- 
tion of statutory law. It has an existence separate and distinct 
from that of the members who compose it. This '' distinct 
entity " theory is fundamental to a proper notion of corporations, 
is constantly alluded to, and furnishes the key to many situations. 

It has been frequently held that where one man has come into possession 
of all the stock, yet this does not allow him to convey away the legal title to 
the corporation's property in his own name. The title must be transferred 
in the name of the corporation. 

The distinct entity doctrine is also shown in the residence, or 

domicile, of a corporation, which is that of the State in which it 

was incorporated, irrespective of the stockholders' residence. 

In a famous case, English corporations were required to be registered, 
under a British regulation. It was argued that as the bulk of the stock was 
held outside of England, therefore it was not an Enghsh corporation and so 
not amenable to the British law. But this view was set aside, and it was held 
to be an English corporation. 

239. KINDS. — All corporations have much in common 
though there are numerous types and classifications. According 
to their object, they are eleemosynary, or those created to carry 
out some charitable object ; religious, which term is self-explana- 
tory ; and civil, embracing all others. With civil corporations we 
shall principally deal. Further subdivisions are public, or 
municipal, and private civil corporations ; public, for the purposes 
of government and management of public affairs, like the organi- 
zation of cities and villages ; and private, such as manufacturing, 
banking, and railroad corporations, etc., etc. Private corporations 
may again be divided into stock and non-stock corporations. 

240. CORPORATIONS and PARTNERSHIPS COM- 
PARED. — It is very helpful to study the two leading forms of 
associations, corporations and partnerships, by frequently con- 
trasting features similar though quite distinct; otherwise many 
elusive characteristics of both subjects are hard to properly com- 
prehend. Let us consider their leading differences at once. 

There are three conspicuous differences: 
(1) In a partnership the doctrine of delectus personalis"^ is 
highly important. 

This is because a partner is selected for his personal qualifications, and 
his interest in the business is not transferable except by consent of all the other 
partners. And if a partner dies the partnership necessarily comes to an end. 

But in a corporation the conditions are just the reverse. Shares in it are 

^Literally, "the choice of persons," meaning the right of a partner to 
determine what persons shall be introduced into the partnership as new 
members. 

139 



§241 



CONTRACTS 



freely transferable without regard to the wishes or consent of other stock- 
holders, and the death of a shareholder has no effect on the corporation. The 
opening definition pointed out that in a corporation there was the capacity 
for perpetual succession. 

(2) Any partner has the legal power to act as agent for the 
others. Within the scope of the business, he may bind them 
absolutely by his action. But in a corporation, no shareholder 
has any power whatever to bind the others, since the whole 
authority rests with the board of Directors. 

(3) In a partnership, each partner is liable for all the firm 
debts. In a corporation the liability of the stockholder (aside 
from statutes) is to pay money only up to the par value of the 
stock subscribed for by him. This feature has contributed 
largely to the growth of corporations in recent years. Many 
partnerships have been incorporated with very few changes. 

Morawetz, a leading authority on corporations, adds to the 
foregoing: — 

(a) While both are formed by the mutual agreement of those 
who compose them, the partnership relation may be established 
by any persons, at any time, and is dependent only upon the laws 
of contract and of agency; but a corporation cannot lawfully be 
formed without the authority of the Legislature. 

(6) At law, the members of a firm are always treated as in- 
dividuals, and the firm, as such, is not recognized (e.g. a deed of 
real estate owned by a firm must be signed by the members 
individually, as the deed is not effective if signed in the firm 
name). But a corporation is considered as one person ('' dis- 
tinct entity *') and its constituent parts are disregarded. A 
partner cannot sue another at law, while a corporation may be 
sued by one of its members. 

{c) Partnership is a relation of special trust and confidence 
personally, and the act or contract of one partner is the act of 
all; while in a corporation the business is managed by agents, 
selected by a majority vote, and the personal element is very 
small. 

241. OTHER FORMS of ASSOCIATION. — On the line 
between distinct corporations and strict partnerships, are joint- 
stock companies. They possess many of the characteristics of 
both forms of association. There are also unincorporated societies 
of numberless sorts ; syndicates formed for the consummation of 
some particular purpose; building and loan associations, which 

140 



CONTRACTS OP ASSOCIATION §243 

may or may not be incorporated ; fraternal, benevolent, and pro- 
tective associations, etc. Leading ear-marks for identifying 
which are really corporations are : Do they have the right of con- 
tinuous succession, under a special name, without being subject 
to dissolution or change of identity by death of members? Can 
they take and grant property, sue and be sued in the corporate 
name, etc., etc.? 

THE CORPORATION 

242. ESSENTIALS. — Certain things are essential in creating 
a valid and legal corporation. 

First, there must be a grant of authority, or charter from the 
State. The general repository of the power to create corporations 
is in the State Legislatures, except so far as it may be controlled 
by restrictions in the Federal or State Constitutions. Congress 
has a very limited power in this respect. 

Second, the grant of power, or charter, must he accepted^ by the 
corporators, constituting an agreement or contract with the State. 

Third, there must be an agreement between the stockholders 
and the corporation. 

243. THEORY of CORPORATE POWERS. — All the above 
points immediately involve the doctrines of contract. Early 
in the last century (1810) in the famous Dartmouth College case, 
the United States Supreme Court established the fact that the 
charter is a contract between the State and a corporation, within 
the meaning of the Constitutional provision that no State shall 
pass a law impairing the obligation of an existing contract. This 
meant, practically, that no State could pass a law altering or 
taking away any of the rights or privileges previously granted to 
a corporation. As this would effectually prevent the public from 
reforming grave abuses of corporate power, should they arise, 
nearly every State subsequently passed statutes that no charter 
should thereafter be granted except subject to being altered or 
repealed by the Legislature. This is law to-day. 

This doctrine that the charter is a contract is worked out as 

* Acceptance of Charter: If a special act has been passed by the Legis- 
lature it is regarded as an offer, open until formally accepted by an act of 
the individual corporators; or until the acceptance could be fairly implied 
from their acts as a corporation. And like every other offer to contract, the 
person who accepts must fulfill the letter of the offer exactly. In the case of 
the corporation, if the terms of the offer (Act of Legislature) are not strictly 
complied with there is no corporation formed. 

141 



§244 



CONTRACTS 



follows: The corporators allege that benefits will flow to the 
public as a result of their incorporation, and these form the con- 
sideration for the rights, benefits, immunities, and privileges which 
the State confers upon them by its act of incorporation. It will 
be readily admitted, in the case of some of the great public-service 
corporations, that this contract theory is sound, but in the case of 
the so-called " predatory " variety it is not so easily seen. 

244. PROMOTION. — Generally some individual conceives 
the idea of having his associates become incorporated. He takes 
the lead in booming the enterprise, securing charter members, 
selling stock on prospectus, etc., and doing everything in his 
power to float the scheme. Such an individual is called a " pro- 
moter." 

An engineer may legitimately and properly act as a promoter when the 
scheme rests upon a sound engineering project about which he possesses 
special and intimate knowledge. If the scheme is really good and intrinsically 
meritorious, then the berth of a successful promoter is likely to be a highly 
comfortable one, since he not infrequently acquires a sizable block of stock 
for his services. 

Promoter's Responsibilities. First, is the corporation liable 
upon contracts made by the promoter? It is to be remembered 
that frequently his activities are greatest before the corporation 
actually exists. It is generally held that promoters are personally 
liable on contracts made by them unless exempt by the terms 
of the contract; or unless the corporation expressly or impliedly 
adopts (see §§ 140 and 146 [5]) them after its organization, as 
by accepting their benefits. 

It seems that the law does not prohibit the circulation of a prospectus 
of very roseate hue, but it must contain no positive misstatement of facts. If 
such a statement is made by a promoter, he will be liable for fraud; and if 
made after incorporation, the company will be liable on the same grounds 
for the tort of its agent. (See § 169.) In case a subscription is thus obtained, 
the subscriber can repudiate the contract and compel the corporation to 
return the money paid. 

245. Subscription. — Under the statutes of some States, it 
is required that the capital stock shall be subscribed and paid for 
either wholly or in part before the charter can be issued; but, 
speaking generally, these are not necessary prerequisites to 
corporate existence. Also, some of the States require that the 
" articles " or certificate of incorporation shall show the amount 
of the capital stock, the amount actually paid in, and give the 
names and residences of all the stockholders, with the amount of 
stock subscribed by each. 

142 



CONTRACTS OF ASSOCIATION §247 

A practical question is, " What is the effect of non-compliance 
with such statutory requirements?'* The penalties are: — 

First: They afford a basis for an action to be brought by the 
State looking to the forfeiture of the charter. 

Second: They sometimes result in rendering the incorporators 
liable as co-partners, on the ground that as they have failed to 
comply with the law, they are not entitled to the privileges and 
exemptions of the corporate form which compliance would have 
conferred upon them. 

Third: Some statutes impose a penalty on the directors and 
officers by making them liable for all debts contracted before the 
statutory requirements have been complied with. 

With reference to the party subscribing, it is held that when 
the corporation is actually in existence, the contract for sub- 
scription may be either expressed or implied, and is binding to 
the same extent as any other contract from the moment it is 
entered into. 

246. INCORPORATION. — Corporations were formerly 
chartered by special acts of the Legislature. The multiplicity 
of modern business affairs which can best be transacted by an 
organization in this form has led to the '' corporation habit," if 
it may be so expressed.* Since a corporation possesses certain 
extensive advantages which a partnership does not have, great 
numbers of corporations, chartered for widely varying purposes, 
have sprung up. This has led to the enactment of general stat- 
utes in all the States specifying in great detail the steps necessary 
to form a corporation. 

For lines of business not mentioned in the statute, a special 

act of the Legislature will be necessary. 

While it is a very simple matter, relatively speaking, to form a corpora- 
tion, every detail specified in the statute must be complied with, or else no 
incorporation is accomplished. For this reason, the services of a competent 
attorney to attend to these details will be essential, or grave difficulties are 
likely to be promptly encountered. 

247. The usual proceeding under a statute is that the persons 
who propose to form a corporation, or a specified number thereof, 
sign and acknowledge an instrument called the articles of asso- 
ciation, giving the name of the corporation, its object, principal 
place of business, amount of its capital stock, the number of 
shares, etc., which is duly filed with the proper State officer, as 

*See Appendix Xote 22, "Advantages in Corporate Form," 

143 



§248 



CONTRACTS 



Secretary of State, or Commissioner of Corporations. When all 

the statutory provisions have been comphed with the charter 

is granted as a matter of course by the proper State official. The 

Legislature, freed from considering these multitudinous special 

instances, is thus enabled to take up other legislative work. 

248. CONSTRUING THE CHARTER and IMPLIED 

POWERS. — The charter of a corporation serves a two-fold 

purpose — it operates as a law conferring upon the corporators 

the right or franchise to act in a corporate capacity; and it also 

contains the terms of the fundamental agreement among the 

corporators. Hence it is to be construed as any other written 

instrument would be, the leading object being to discover the 

intention of the parties. 

Thus, those who have become members of a corporation have proved 
an intent to prosecute the business expressly set forth in the charter, and they 
do not intend to enter into any other speculation. This is an important prin- 
ciple upon which rest the rights of minority stockholders, when a radical 
departure, or innovation in the corporate affairs is attempted by the majority, 
such as changing the kind of business, absorbing another company, etc. (See 
also § 249.) 

It is clear also that the intention of the Legislature is to enable 
the corporators so to act as to carry out the business for which 
the corporation is formed. From which it follows that every 
act of a corporation which is not affirmatively authorized by its 
charter is in excess of its corporate powers as conferred by the 
State, and is also a departure from the primary agreement between 
the original members of the company. In pursuing this line of 
reasoning, the Supreme Court of the United States has said : "It 
remains true that the measure of the powers of a corporation is 
to be found in its charter; but it is equally true that what is 
fairly implied is as much granted as what is expressed, and that 
the enumeration of these powers implies the exclusion of all 
others." 

As the foregoing paragraphs indicate, a large body of corpora- 
tion law deals with this doctrine of implied powers. The principle 
already outlined is : A corporation has no power to enter into a 
contract that is not expressly or impliedly authorized by its 
charter ; but any contract that is reasonably necessary for carrying 
out the powers expressly conferred is impliedly authorized. A 
contract is said to be ultra vires and therefore void if it is beyond 
the power as measured by the charter to make such contract. 

A list of powers generally considered to be implied is : to sell 

144 



CONTRACTS OF ASSOCIATION §249 

and to purchase such real and personal property as the corporate 
purposes require; to borrow money whenever the nature of the 
business renders it expedient or necessary ; to issue bonds for any 
purpose for which a debt could be contracted; to make and 
endorse negotiable paper, if that is a usual or proper means of 
accomplishing the purposes for which the corporation was created. 

Common Law Powers of a Corporation. As hinted elsewhere, statutes 
are generally framed from the timber furnished by the common law. This is 
as true of corporations as of any other branch. Thus a corporation enjoys 
certain powers almost irrespective of statutes, though in fact the following 
powers have been quite generally inserted in the statutes. 

(1) The right to the use of the corporate name; 

(2) The right to perpetual succession; 

(3) The right to acquire, hold, possess, and dispose of corporate property; 

(4) The right to appoint corporate officers and agents ; 

(5) The right to establish by-laws for the government of the corporation, 
its officers, and members. 

(6) The right to sue and be sued. 

The doctrine of ultra vires also occupies a prominent position 
in the body of corporation law, since the line between legitimate 
contracts made under impHed powers, and those which go a step 
further and can with certainty be said to exceed the powers, is 
often a very hard line to draw. 

249. ULTRA VIRES. Ancient Doctrine. — If a corporation 
makes a contract which is unauthorized by, or in violation of, its 
charter, or entirely outside the scope of its express powers (whether 
given by charter or statute), the contract is void upon the ground 
of incompetency. (See § 23.) This is because of a total want 
of power to enter into the contract; hence it is absolutely void 
from the start. Such a contract can never be made good by 
ratification, nor can it ripen into an implied contract by reason 
of having been performed, since the law will not imply validity 
on an unlawful contract. (See § 70, and Thompson on Corpora- 
tions, § 5968.) 

"The reasons a corporation is not liable upon an ultra vires contract are 
found: — 

(a) in the interests of the public that the corporation shall not transcend 
the powers granted ; 

(Jd) the interests of the stockholders that the capital stock shall not 
be risked in enterprises not contemplated in the charter, and therefore not 
authorized by the stockholder in subscribing for the stock; 

(c) the fact that the charter which contains the granted powers is a 
public statute, of which all parties are bound to take notice and be governed 
thereby." (11 Allen 65, and 131 U. S. 37.) 

Modern View. — Except in " quasi-public-private corpora- 
tions," the pubhc has no direct interest whatever in the nature of 

145 



§ 249 CONTRACTS 

the powers i^ested in them. Corporations are now chiefly organ- 
ized under general statutes, and not by special act of Legislature, 
and thus the charters are not promulgated publicly, and it may 
be difficult to consult them. To require a stranger to fully inform 
himself upon the contents of such charters would place an un- 
reasonable hardship upon him. 

In modern times, frequently a great number of purposes are 
enumerated in the articles of incorporation, and thus the corpora- 
tion will have almost unlimited scope along business lines. This 
removes the objection mentioned above, that capital shall not 
be subjected to risks not contemplated in the charter. 

Practical Status of Ultra Vires. — The engineer or business 
man will wish to know what weight the doctrine has relative 
to corporate contracts, existing, prospective, or fully executed 
and past. Numerous cases seem to establish the following prop- 
ositions : 

(1) Courts seldom recognize the claim that a contract, other- 
wise unobjectionable, is void because beyond the chartered 
powers of the corporation, if to allow the claim of ultra vires 
(when set up as a defense) would defeat justice, or shield one in 
wrongdoing. 

(2) The doctrine of ultra vires is not usually applied when it 
is claimed as a defense by a person who has received a benefit 
through the unlawful act which is said to be ultra vires. 

(3) If the act complained of is an abuse of power merely, then 
the State alone, acting through its Attorney General, can act. 

(4) The doctrine of " estoppel " is apphed in the case of com- 
pleted contracts, to the effect that the claim of ultra vires shall not 
be allowed. This is held to dispose of the theory that persons 
dealing with a corporation are bound to take notice of their 
charter powers. 

The doctrine of "estoppel" here referred to means that where one by 
his words or conduct willfully causes another to believe in the existence 
of a certain state of facts, and induces him to act on that belief so as to alter 
his previous position, the first person is precluded (i.e. "estopped") from 
averring against the second person, that a different state of things did exist 
at the time. To paraphrase the point, one does not have the right to "blow 
hot, and then cold," even in law, — a principle which has wide application. 

Thus, in applying the doctrine of '' estoppel,''^ the courts hold 
(a) that if there has been no express violation of law, the cor- 
poration is estopped by its own contract or conduct from setting 

14G 



CONTRACTS OF ASSOCIATION §252 

up as a defense, that it was not in its power to make such contract, 
when sued for the enforcement of it. 

(6) that where a private corporation enters upon a contract 
in excess of its granted powers and has received the benefits of the 
contract which the other parties acted upon, the corporation 
is estopped to repudiate the contract on the ground that it is 
ultra vires. And repeatedly, the courts have held 

{c) that where a contract with a corporation, — the making 
of which is beyond the chartered powers, has been jully executed 
by both parties to the contract, neither of them can assert its 
invalidity as a cause of action against the other. 

250. Things which a corporation can not do are : to bind itself 
by an accommodation note or bill; to enter into a contract of 
partnership; and in general, to subscribe for, purchase, or hold 
stock in another corporation, except that it may take such stock 
in good faith as security for a previous debt, and hold the same 
temporarily. Of course the charter may expressly authorize these 
things, in which case the rule will not apply. It cannot, in some 
jurisdictions, purchase any of its own stock, either for the purpose 
of selling, holding, or retiring it, though it may take its own stock 
in payment of a debt due it. 

251. TRANSACTION of BUSINESS. — The business of the 
corporation is transacted by a Board of Directors, or managers, 
and such other officers and agents as may be necessary, all of 
whom may bind the corporation by acts done within the scope 
of their authority. The Directors have the power to bind the 
corporation by any act or contract within the powers conferred 
by the charter except that they cannot effect any great and radical 
change in the organization of the body without the consent of 
the stockholders. 

The distinct entity theory is illustrated by the fact that stockholders 
have the same right to contract with the corporation as if they were strangers. 
But an officer, as such, cannot contract with himself on behalf ot the cor- 
poration, or convey to himself in his individual capacity unless he acts under 
the immediate direction of a superior officer. 

252. The officers of a corporation, being entrusted with its 
affairs, and custody of the funds of all the stockholders, stand 
in a fiduciary relation toward it and them. Their position is 
practically that of trustees, charged with the care of the corporate 
funds, and they are required to exercise an even greater care than 

147 



§ 253 CONTRACTS 

they would of their own, and are personally responsible for any 

misapplication of such funds, or loss through their negligence. 

The underlying reason for this is in the application of the equitable 
doctrines of trusts (a large and important branch of jurisprudence which 
cannot be entered upon here, see § 95). Thus it is that the directors of a cor- 
poration cannot directly or indirectly derive a personal advantage or profit 
from their position which is not enjoyed in common by all the stockholders. 
Secret profits made by them in transaction of company business belong to 
the company. 

253. LIABILITY in TORT. — A private corporation is liable 
to outside persons for the torts of its servants and agents com- 
mitted in the course of their employment, to the same extent that 
a natural person would be, as a principal. This, it will be per- 
ceived, is the reason for the liability of railroad corporations in 
practically all of their damage-suits. 

254. DISSOLUTION. — We may mention briefly the ways 
in which a corporation is dissolved, or its existence is ended. If 
the charter specifies that it shall exist for a limited time only, 
when the time elapses, the corporation ipso facto expires. This 
arrangement is not generally made, nowadays. The corporation 
also may be dissolved by an act of the Legislature repealing its 
charter, under the State's reserved right to repeal ; by surrender 
of its charter with the consent of the State; by forfeiture of its 
charter by reason of mis-use, or of non-use. The commonest 
method is by surrender. 

If the project has been voluntarily abandoned, or if it becomes 
impossible to go on with it for any reason whatever, it is the 
company's duty to its creditors to call in whatever capital may 
be necessary to settle up its affairs ; and in such a case every 
shareholder when called upon by the corporate officers will be 
hable to contribute his proportionate amount up to the full price 
of his shares. (See § 257.) 

THE STOCKHOLDER 

255. STOCK and CAPITAL. — The capital of a corporation 
is the fund with which it conducts its business, and embraces all 
its property, both real and personal. The capital stock is the 
amount of capital prescribed by its charter to be subscribed, or 
contributed at the outset, and remains unvaried unless changed 
according to the terms of the charter, or by an act of the Legis- 
lature. In theory, the aggregated funds of the corporators fonn 
the capital, or capital stock of the corporation. To the community 

148 



CONTRACTS OP ASSOCIATION §257 

at large, the capital stock announces the extent of the means 
contributed, and thus enables every one to form an opinion of 
the credit to which the corporation is entitled. The amount of 
capital stock will depend upon the probable amount of money 
required to achieve the end for which the corporation was created. 
If a statute requires a specified amount of the capital stock to be 
paid in, before the corporation can do any business, there is thus 
given additional information as to its resources. 

256. CONTRACT of MEMBERSHIP. — The stockholders 

are bound together by a contract, set forth in the charter (or in the 

articles of incorporation, if created under general laws). But 

this is not an ordinary common law contract, since it is illegal 

to enter into it in the absence of an enabling act, or a charter — a 

reason why the corporation must be formed strictly in accordance 

with statutory requirements. (See §§ 246 and 240 [a].) Every 

person who subscribes for shares agrees to associate with the 

other members upon the terms and conditions indicated in the 

charter. 

Among the things agreed to by him is that he will contribute to the 
capital stock the amount subscribed for by him, and the corporation may 
enforce its rights to be so paid. In general, the total stock must have been 
subscribed before the corporation can proceed against any subscriber. 

257. Kinds of Stock. — A share of stock is the right to share 
in the surplus of a corporation and ultimately, upon dissolution, 
to share in the net assets remaining. A stock-certificate is a 
written acknowledgment by the corporation, of the rights and 
interests of the stockholder in the corporate property and 
franchise. 

The common stock entitles the holder to ^ pro rata division of 
the profits, if there are any. Some corporations issue no pre- 
ferred stock, but only common. The preferred stock is limited 
in its participation in the profits, however, to the amount which 
it is stipulated that it shall receive. Up to the stipulated amount, 
the preferred stock takes all the dividends, even though there is 
none remaining for the common stock. 

Thus suppose, for example, that a corporation has made an annual net 
profit upon its capital of 50%, and that there is 7% preferred stock outstand- 
ing. In this case, if the directors voted it, 43% would go to the common 
stock, and only 7% to the preferred. 

Where a corporation has both preferred and common stock, 

the common is much more speculative. It is not to be understood 

in the case of the 7% preferred, that 7% is guaranteed but rather 

149 



§ 258 CONTRACTS 

that all profits up to that amount will be assigned to it as earned. 
Whether there shall be any preferred stock or not, and how much, 
must be determined in advance of the sale of any stock of either 
kind. Then those who choose to buy the common, purchase with 
full knowledge that its share in the earnings will be deferred. 

Full-Paid Stock is stock the par value of which has been paid 
for either in cash or property. Its owner is not subject to any 
further liabilities either to the corporation or the creditoi-s (ex- 
cept as noted in § 260 [ b ]) . 

Many of the States provide by statute that no corporation shall issue 
stock except for money paid, labor done, or property actually received, and 
declare all fictitious increase of stock to be void. Under such circumstances 
an original issue of stock as fully paid at less than par will be void. 

Many cases will be found bearing upon the validity of so- 
called " bonus " or " promotion " stock. In regard to its vaHdity 
and the stockholder's liabihty the courts differ. 

The Court of Massachusetts (followed by New York) says, "When stock 
is issued, it represents the proportionate interest of the shareholders in the 
corporate property, — subordinated to the claims of the creditors. The 
liability of a shareholder to pay for his stock depends upon his contract, 
express or implied, or upon some statute. In the absence of these grounds 
of liability, we do not perceive how a person to whom shares have been issued 
as a gratuity has by accepting them committed any wrong upon the creditors 
or made himself liable to pay the nominal face value of the shares, as he would 
be had he made a contract of subscription." (142 Mass, 349.) 

Meaning of Non-Assessable Stock. — It is held to be unquestionably 
within the powers of a corporation to agree with stockholders that stock 
shall be issued to them at less than par, and when so issued they shall not be 
subject to any further assessments on the part of the corporation. But this 
is held not to have the effect of preventing subsequent creditors of the cor- 
poration enforcing the payment of balances due them in case of its insolvency. 

Extraneous to the matter of issuing non-assessable stock, it 
is held that the right to levy assessments upon stockholders does 
not exist after payment by such stockholders for their stock in 
full, unless the power to do so is conferred either by statute, by 
the articles of association, or by the unanimous consent of all the 
stockholders. 

258. STOCK WATERING. — If an increase in the capital 
stock is made when in fact no additional value has been paid in, 
either in cash, or in money's worth, this is called " stock-water- 
ing.'* Shares are issued as fully paid up, which is not the case, 
and the difference between the par value and what is actually paid 
in is " water." Its effect is to decrease the value of the stock 
already outstanding because each share then represents a smaller 
claim upon the company's assets, and requires the gross dividend 

150 



CONTRACTS OF ASSOCIATION §261 

to be cut into smaller slices. In general, the power to increase 

capital stock exists only when conferred by the express terms of 

the incorporating act under which the corporation is organized; 

in the absence of it the issue is void. 

Stock-watering is perhaps never morally legitimate but it may be legalized* 
as has just been shown. Thus the issuance of watered stock is a favorite 
device of promoters of companies, organizers, and manipulators. By it they 
strive to carry out their plans of realizing enormous gains from small invest- 
ments, or to conceal large and unreasonable profits. For it is evident that 
if huge profits are made upon 1,000 shares, and that amount is then watered 
by increasing the shares to 5,000, the extra 4,000 may be voted to the original 
holders for nothing, whereupon the seeming return upon the number of shares 
outstanding has become very moderate. 

259. INCIDENTS of OWNERSHIP. — Stockholders have 
the right to meet and elect directors ; to prescribe by-laws ; to 
inspect the corporate books; and to receive such dividends as 
shall be lawfully and fully declared by the directors. But there 
can be no suit for dividends already earned until the directors, 
acting with sound business discretion, have declared the same. 
The ownership of shares entitles the owners to participate in the 
management of the business, to share in the profits, and in the 
surplus after the payment of corporate debts. 

260. Liability of Stockholders. — By the common law stock- 
holders were liable to the full extent of the par value of the 
capital stock subscribed for by them, and to this fund and to the 
profits and surplus on hand the creditors were obliged to look. 
The stockholders' liability for the corporate debts may be dis- 
cussed under two heads : 

(a) Unpaid Stock Subscription. "The capital stock of an incorporated 
company is a fund set apart for the payment of its debts. It is publicly 
pledged for the security of those who deal with the corporation. Unpaid 
stock is as much a part of this pledge, and of the assets of the company, as the 
cash which has been paid in. The stockholders thus become liable for the 
debts of the corporation to the extent of the unpaid balance on their stock. 
Where there is a statutory liability, this is intended merely as a secondary 
security for the creditors in case the assets of the corporation are insufficient 
to meet its debts. " (9 1 U. S. 60.) 

{h) Special Statutory Liability. Personal responsibility of stockholders 
is inconsistent with the conception of corporate liability at common law, and 
if it exists at all, must rest upon some positive statute. (40 N. J. L, 52.) 
This liability may, therefore, take a variety of forms. The double liability 
imposed upon stockholders in National Banks, is a familiar example. In a 
few States the incorporators are liable as partners if they fail to legally organize 
as a corporation. In another group of States the stockholders are liable for 
all debts of the corporation in full; while in another group, they are individually 
liable for any fraud or misconduct on their parts, etc., etc. 

261. The directors will be liable to creditors when their wrong- 
ful acts have diminished the fund to which the creditors look, as 

151 



§ 262 CONTRACTS 

when they have unlawfully declared an unearned dividend, the 
effect of which was to cause the insolvency of the Company ; or for 
debts contracted before the statutory requirements as to sub- 
scription, publication, etc., have been comphed with. Other 
acts by which they will incur liabihty in various jurisdictions are: 
Violation of express statutes ; making loans to directors ; loss of 
funds through negligence ; embezzlement of officers ; permitting 
an illegal issue of stocks and bonds, etc. 

262. RIGHT to TRANSFER STOCK. — A leading dis- 
tinction between a corporation and a partnership lies in the degree 
of transferability of their shares. In a corporation, except in 
so far as it may be restricted by charter, or by an authorized by- 
law (called the '' close corporation by-law "), shareholders have 
an absolute right to transfer their shares to any one who is capable 
in law of taking and holding them. This they may do without 
consulting the wishes of any other shareholder. 

When the transfer is made in good faith, the transferee takes 
the place of the first holder, assumes all his rights, and is subject 
to all his liabihties, also. The usual mode of transfer is by a 
written assignment with a power of attorney to transfer the stock 
on the books of the Company. In accordance with this, the old 
certificate is cancelled, and a new one issued to the new owner. 

Corporations Holding Stock in Other Companies. — The pre- 
vailing rule in this country is that unless power is expressly given 
by statute, or by reserving such right in the charter, corporations 
have no implied power to subscribe for, purchase, or hold stock 
in other corporations. But if there is no statutory prohibition 
in the matter, and a charter is granted which contains this privi- 
lege, then of course it can be safely exercised. The organization 
of subsidiary companies is similarly dealt with; and so is con- 
solidation with other companies. 

MUNICIPAL CORPORATIONS 

263. Many of the principles discussed under the general head 
of private corporations also apply to public and municipal cor- 
porations. The term " pubHc corporations " includes cities, 
villages, townships, and counties though the two last are rarely 
if ever actually incorporated. They are each organized to per- 
form functions of self-government, are created by the State, 
and in general, they possess only such powers as it confers upon 

152 



CONTRACTS OP ASSOCIATION §264 

them. A public corporation, like a private one, is a distinct 
entity, and represents the unification of a large body of inhabitants 
into one distinct legal personafity. A private corporation rests 
upon an express or implied contract between the corporators and 
the State, and a contract between the individuals composing it. 
There is no such contractual relation in the case of a public cor- 
poration, since its chief purpose is to further the ends of local 
self-government. The central government (the Legislature) has 
practically unHmited powers over a municipal corporation and 
may modify, diminish, or enlarge its powers. In the case of the 
private corporation, its charter rights are extensively protected. 

264. CHARTER POWERS. — The distinctive charter powers 
which may be conferred upon and exercised by a municipal cor- 
poration are very numerous, — with not a few of them the engineer 
may be directly concerned. Thus in the control of public parks 
and squares, a city may, under legislative authority, acquire such 
lands by eminent domain. (See § 235.) Though as a rule, a 
city has no power to act outside its territorial limits, yet if it 
owns and controls such a park, the city's powers in regard to it are 
the same as if it were owned by a private corporation. 

With reference to wharves and docks, power is usually con- 
ferred to control and even to erect such structures. Another 
similar special power often given the city is the right to control 
ferry franchises, to license them, or operate them in its own behalf. 

A considerable body of powers deals with the public health and 
safety. A municipal board of health usually enforces sanitary 
regulations made by the State, and may promulgate additional 
local regulations. 

The establishment and regulation of fire departments falls within the above 
classification of powers. Thus it is held that a city has authority to establish 
fire limits within which only fire-resisting materials shall be used for structures; 
and that it may destroy buildings to prevent the spread of fire (for which it 
is generally held that the city incurs no liability to the owner, though some 
States have provided otherwise). 

In this connection it is held that a city is not liable for the negligent acts of 
its servants in the fire departments, or other agents or ofl^icials, nor for the 
acts of those persons charged with the enforcement of its sanitary and health 
regulations. In these cases the city is performing services of a purely public 
character. There is no elenient of guaranteeing the safety or satisfaction of 
the individual served gratuitously, as there would be, if the services were 
performed under contract by a private corporation for hire. 

To explain why the rule against municipal corporations seems 
so lenient, the great Chief Justice Marshall said : '' Money cor- 
porations are those which carry on business for themselveS; and 

153 



§265 CONTRACTS 

they are liable for their torts, while legislative [municipal] cor- 
porations established as part of the government are not." 

The water supply of a city furnishes a field of great engineering 
and legal importance. It is held that to supply itself with water 
a city cannot divert the water from a stream if to do so would 
injure the riparian owners. (65 Pa. 444.) But under a power 
of eminent domain a city may be so authorized to divert w^ater 
for public purposes. (4 Gray 500.) 

As to the quality of the water supply, it has been held in England that a 
city is not liable for disease contracted by a citizen from the city's impure 
water supply; but that a private water company would be liable in such a 
case, since they operate the water-supply system for the purpose of private 
gain. 

With reference to city-owned gas works, however, a different 
position is held, to the effect that for negligence in supplying this 
commodity, the city w^ould be liable to the same extent as a private 
company. 

A highly important restriction, which is quite generally im- 
posed upon municipalities, is the limitation upon its power to 
borrow money. Jurists disagree as to whether the power to borrow 
at all is an implied one, or must necessarily be expressed or sanc- 
tioned by legislative authority; but in general, there is an ex- 
press limitation on the amount which can be borrowed for any 
purpose whatever. This amount ranges from 5 to 10% of the 
assessed valuation of the property within the city limits. 

There is an imposing array of cases to the effect that a person, — an 
engineering contractor, for example, — about to enter into a contract with 
a municipality, must ascertain at his peril the legal limits of the municipal 
indebtedness. He must determine for himself whether the proposed contract 
will cause the limit to be exceeded, for if it does he cannot enforce payment 
of the debt which may be due him. (See § 23.) 

There is an important exception to this rule, however, where the debt is 
incurred through a breach of obligations imposed upon the city by law. Thus, 
if a city fails to keep its streets or sidewalks in repair, — or do any other 
acts wherein it may be held accountable for its negligence, — it cannot escape 
liability on the plea that damages cannot be collected because the city is 
already up to or over its debt limit. (99 111. 329.) 

265. LIABILITY of MUNICIPALITY in TORT. — A city 
is not liable for legislative or discretionary action on the part of its 
officers resulting in private damage; nor for its neglect to abate 
nuisances ; nor for the destruction of private property within its 
limits by mob violence, even though statutes make it the city's 
duty to police its streets. 

Streets. — At common law, the city was not liable for daniages 

154 



CONTRACTS OF ASSOCIATION §265 

due to changing the grade of its streets, though this is now gen- 
erally changed by statutes and decisions. But if the change of 
grade is made for other than the common street purposes, — as by 
a railroad company improving a grade-crossing, for example, — 
then, at common law, abutting owners have a right to damages 
for such change. 

It is held that the city owes no duty of lateral support (see 
§ 210) to owners abutting on a street whose grade it lawfully 
changes, for this common law obligation between individuals is 
not applicable to municipalities. 

In most States municipal corporations are held liable for 
injury to persons caused by defective and unsafe streets, sidewalks, 
and bridges, within their corporate limits. The city is not an 
insurer of the safety of persons using the streets, but is bound 
merely to keep them in a condition reasonably safe for travel in 
the ordinary modes. 

The city's agents must have had notice of the defect, however, 
and the plaintiff must not have been guilty of contributory negli- 
gence. In one case, the city negligently allowed ice caused by a 
broken water main to remain after it had had a reasonable oppor- 
tunity to remove the same, and it was held liable for injuries 
resulting therefrom. (118 S. W. Rep. 994.) 

Sewers. — With reference to sewers, Dillon, an eminent 
authority, says : 

First, a municipal corporation is not liable on account of the 
insufficiency of the system adopted, except where it has the direct 
effect of precipitating sewage upon private property; 

Second, the city is liable for injuries resulting to private prop- 
erty from the negligent execution or construction of the plan of 
sewerage adopted ; or for the negligent failure to keep the same in 
repair, and free from obstructions. When the sewers of a city 
have been built at public expense and the property in them is 
vested in the city, neglect in their construction or repair whereby 
private property is injured gives a right of action against the 
city. (110 Mass. 216.) 

The maintenance of a free public sewer by a city is an exercise 
of its police powers, for the public benefit. (See § 264.) Hence 
a city was not liable for the death of a citizen from illness caused 
by pollution due to such sewer. (Asheville, S. C. See 64 S. E. 
Reporter 88.) 

155 



§266 CONTRACTS 

PARTNERSHIP 

266. Partnerships were known before the legal relationship 
called a corporation was invented. When an undertaking too 
large for the personal resources of the projector came up, he 
invited one or more persons in whom he reposed sufficient con- 
fidence to pool their assets with him. Upon the strength of their 
combined credits and resources, whether of property, money, 
personal skill, or knowledge, the scheme was undertaken. The 
resulting status of the individuals was in law known as a partner- 
ship. Our present purpose is to present some of the most prom- 
inent characteristics of this legal status, or relationship. The 
discussion will fall under three general heads, viz. : general and 
limited partnerships, and joint-stock companies. 

267. DEFINITION. — A partnership is defined as the rela- 
tion existing between persons who have agreed to combine their 
property, labor, or skill, or some or any of them, in lawful com- 
merce or business, sharing the profits, and generally the losses, 
between them. It is purely a contract relation, resting upon an 
agreement either express or implied, and the ordinary rule of com- 
petency to contract applies. (See § 23.) 

Any person who is capable of contracting may be a partner. Corporations 
form a notable exception, and for cogent reasons of justice and equity, no cor- 
poration can enter into a contract of partnership. A partner is general agent 
for his firm, while the agent of a corporation is a duly elected officer, possessing 
the confidence of the stockholders, and by them authorized to do specific acts. 
If the corporation had a partner, under the rules of partner's agency (see § 277) 
he would have power to bind the corporation and control its affairs without 
the assent of the corporation stockholders, and results gravely prejudicial to 
them might ensue. 

268. PARTNERSHIP ARTICLES. — When forming a part- 
nership, if the parties choose to regulate their rights, powere, and 
duties among themselves by a formal written instrument, it is 
termed the " partnership articles." Like every other contract, 
it must be construed (see § § 80-1) or interpreted, and much 
matter not expressed in the articles will be implied and enforced 
by common law rules. 

The articles must be construed with reference to the purposes of the 
partnership; to defeat fraud; and one partner's taking unfair advantage over 
another. Should the firm continue beyond the term first agreed upon, the 
same articles will govern, unless new ones are provided. Of course the terms 
may be modified by mutual agreement, like any other contract. * 

Some of the topics usually treated in the articles are: The 

general nature of the business ; time of commencing, and duration 

*See Appendix Note 13. "Construing Partnership Articles." 

156 



CONTRACTS OF ASSOCIATION §271 

of the relation ; the name, or style of the firm ; the capital or ad- 
vances contributed or made by each partner, and his rights, 
duties, and share of the profits ; provision for annual accounts, and 
for general accounting upon dissolution ; restraint upon partners 
from transacting similar business to compete with the firm ; refer- 
ence to retirement of a partner, or sale of his interest, and the 
status of his representative in case of death during the term ; and 
so on, according to the desire and intention of the parties. 

269. PARTNERSHIP by IMPLICATION. — When there 
are clear and explicit '' articles '' it is easy to determine whether 
a bona fide partnership was created. But in the absence of such 
articles, the detection of a binding implied contract (see § 68) of 
association is frequently very difficult. By the force of circum- 
stances, of. which innumerable combinations might arise, it could 
be found as a matter of law, that a partnership did exist even 
though the parties were entirely unconscious of the fact, and 
did not intend that relationship; and this too, even though the 
critical test lies in the intention of the parties. 

'^Holding Out." — It is not likely that any prudent business man will 
leave the determination of his relationship to a fellow-trader to mere inference, 
when the existence of what we may term a primary partnership is in question. 
But where there is a " holding out," another partnership relation springs up 
with regard to one or more outsiders creating by implication a secondary part- 
nership, though perhaps the original one ivas formed by express agreement. 

This may happen where a person by declaration or by acts, represents 
himself as a partner, or suffers himself to be so represented. He then becomes 
liable to third persons just as if he were in fact a partner, though there are no 
rights whatever as between himself and the original partnership. A com- 
mon instance is where a retiring partner is liable on subsequent firm debts 
because he neglects to give notice of his withdrawal. Or perhaps he does not 
forbid the use of his name by the firm, or the retention of it in the firm name. 
It may happen in other ways, also, and it is always a question of fact, whether 
the holding out creates the partnership relation. 

270. The spirit of the foregoing is also stated thus: ** Every one who by 
words, spoken or written by himself, or by conduct represents himself, or 
knowingly suffers himself to be represented as a partner in a particular firm, is 
liable as a partner to any one who in good faith gives credit to the firm on the 
strength of such representation." Such an individual is said to be "estopped" 
(see § 249 [4]) to deny that he is in fact a member of the firm, and the resulting 
quasi-contractual (see § 129) relation is called a "partnership by estoppel." 

There is an apparent exception to this if after a partner's death the business 
is continued in the same name, for such use would not of itself make the 
deceased partner's executors or administrators liable for any partnership 
debt contracted after his death. 

271. PARTNERSHIP TEST. — Even where articles of a 
more or less definite and extended sort have been prepared, still 
questions may arise as to whether a partnership really exists. The 
best test is : If you can find from all the circumstances that the 

157 



§ 272 CONTRACTS 

parties intended that they should be mutually principals and 
agents ; that each should have power to bind the other as his 
agent in affairs pertaining to the trade, — if you can find by ex- 
press agreement, or by their conduct, that this is what is intended, 
then you have a partnership ; this is their intention prima facie, 
when they agree to share profits and losses. This test is applicable 
through the most widely varying sets of facts. Since partnership 
rests upon a contractual basis of agreement between private 
parties, it will be seen that here is but another application of that 
leading doctrine for construing contracts, viz. : The intention of 
the parties shall prevail. (See § 81.) 

All the circumstances of each case must be specially considered. The 
facts that each person has contributed capital, skill, and labor, shares in the 
management and in the profits and losses of the business, are all strong evi- 
deiice of intention to form a partnership, and such parties may, by outsideis, 
be held liable as partners, even though among themselves they have expressly 
stipulated otherwise. 

272. Partnership and Joint Enterprises Distinguished. — In a case where 
three Railroad Companies and Steamship Lines agreed to carry freight over a 
certain route and to divide the returns, this was held not to be a partnership, 
but merely a joint enterprise. Another case shows that an agreement to pay 
for services or commissions out of a share of the profits did not constitute a 
partnership; probably because it was not so intended, and the servant or em- 
ployee w^as to bear no losses, — only to share in contingent profits. 

In another case, A and B contracted that if B should advance $5,000 to 
carry on a smelting business, A would pay him 10% of the profits. Third 
parties sued, claiming this w\as a partnership. The original agreement was 
that A should have the use of the money for one year. The transaction was 
held to be merely a loan ; A and B were debtor and creditor, but not partners. 

Agency. — A person sued as a partner was employed to purchase and 
forward produce, for which he w^as to receive a share in the profits. He had 
no interest in the capital stock of the company, and exercised none of the usual 
powers of a partner. He was held to be merely an agent. 

Profits. — It was formerly held that all persons who shared in 
the profits of a business incurred the liabilities of partners therein, 
even if no partnership was contemplated among the parties. It 
is now held, upon the ])est authority, that the test is to be found 
in the intention of the parties (see § 271) to enter into the relation- 
ship of partners. Although it is usual for partners to share losses, 
an agreement whereby one is to bear them all is not invalid. 

273. FIRM NAME. — A firm name is not essential to the 
existence of a partnership, but is convenient in the transaction of 
busine.ss, and when one has been adopted all the firm business 
should be conducted under it. Any name may be adopted em- 
bracing the names of some one, part, or all of the partners ; or it 
may be purely fanciful giving no clue to the identity of the 
partners, as the Eureka Contracting Co., Western Construction 

158 



CONTRACTS OF ASSOCIATION 

Co., etc. Names which a firm can not adopt are those whi 
purport distinctly to be the name of a corporation, or one which 
has been, and is, used by another firm or company, and which has 
become associated with and appropriated to their business. In 
such a case it has become a part of their " good will," and is an 
asset with a property value. If this property right were not recog- 
nized, practically all money spent in advertising would be wasted. 

Notice and Firm Name. — B and K were partners under the 
name of Spring Brook Mill Co. This firm was dissolved by both 
members seUing out, but the incoming purchasers carried on the 
business under the same name. The plaintiff had contracted with 
the new firm without knowledge of the dissolution. The Massa- 
chusetts court held that if plaintiff had been dealing with the 
former partnership, even though in ignorance of the identity of 
its members, yet they had no right to step out without giving 
notice, and thus shift the responsibihty of future contracts upon 
persons who might not be responsible. Hence the original firm- 
members were held liable. 

The firm name becomes of importance also with reference 
to the holding of real estate, for while a partnership may own 
and even deal in real estate it cannot hold legal title in the firm 
name, but must hold jointly in the names of the partners who com- 
pose the firm. Therefore when they convey firm realty, all the 
partners must sign the deed individually. This is another illus- 
tration of the difference between a partnership and a corporation, 
and of the absence of the " distinct entity '* theory in partnership. 
Personal property, however, may be bought and sold in the firm 
name. This is a practical rule of great usefulness. 

274. DISSOLUTION. — Some partnerships are formed to 
last for a definite period, and others exist " at will " of the persons 
composing them. They can be dissolved at any time by notice 
from one partner ; by his selling out his interest, and giving notice 
thereof; or by a partner's bankruptcy. Death of a partner 
will ipso facto terminate a partnership, and the bankruptcy of the 
firm has the same effect. But if the parties choose to make a 
positive arrangement covering such matters in their articles of 
partnership, it can then be provided that the death of a partner, 
sale of his interest in the firm, or his bankruptcy, shall not dis- 
solve the partnership. It may be truer to say that the firm is dis- 
solved by such act, notwithstanding their agreement, and that in 

159 




§ 275 CONTRACTS 

reality a new contract relation, conditionally provided for in the 
first agreement, automatically enables a new partnership to spring 
into existence. 

There are other causes for which a court of equity will decree a 
dissolution, namely: Insanity, or other incompetency of a part- 
ner; gross misconduct of the business by one partner, when the 
aggrieved party can get a dissolution, as where the former has 
sought to withhold from his co-partner the profits of some secret 
transaction; or where one co-partner has sought to exclude or 
expel another, or to drive him to a dissolution ; or where the busi- 
ness has been a failure, and there is an impossibility of making a 
profit. 

275. But even upon dissolution the rights and duties of part- 
ners do not immediately come to an end, since it is the duty of 
some one or all of them to do such acts as are necessary to wind 
up the business. For the purpose of properly finishing and carry- 
ing out business remaining unfinished at the moment of dis- 
solution, any partner may make new or supplementary contracts 
which will bind the firm. But the subject matter of the last con- 
tract must not be entirely new and distinct from the prior 
business. 

A firm manufacturing clothing was dissolved by the death of a partner, 
yet the surviving partner entered upon new contracts for the purpose of com- 
pleting a large quantity of unfinished clothing on hand at the partner's death. 
This was held to be necessary and proper in order to realize a fair value upon 
the goods, and therefore the estate of the deceased partner was bound by these 
contracts, made after dissolution. 

Upon dissolution, the partners or survivors must give notice 
of the dissolution, must pay all the firm debts, applying the firm 
property for this purpose and make up the deficit pei*sonally, if 
there is one. (See § 279.) If there is a surplus, each has a right 
to his share in it according to his share in the firm.* 

276. KINDS of PARTNERS. — There are various types of 
partners known as general, special, ostensible, secret, silent, and 
dormant partnei*s. To define: A general partner is one who is 
liable for all the firm debts, while a special partner is one whose 
liabihty for the firm debts is limited to a specified amount. An 
ostensible partner is one whose connection with the firm is openly 
avowed, but a secret partner is one whose connection is concealed, 
or at least, not announced nor made known to the public. A 

♦See Appendix Note 14, "Final Accounting." 

IGO 



CONTRACTS OF ASSOCIATION §278 

silent partner is one who shares in the profits, is an ostensible 
partner, yet has no voice in the management. A dormant partner 
combines the characteristics of both a silent and secret partner, 
and though his character as partner is concealed, he has no voice 
in the management. When discovered, he is liable as a general 
partner, in so far as those who know him to be a partner are 
concerned. The discussion which follows pertains almost wholly 
to the rights and obligations of a general partner. 

277. PARTNER'S POWERS. — Perhaps the central feature 
in this whole discussion of partnership is the power of the indi- 
vidual partner, and his attendant liability. Every member of an 
ordinary partnership is by implication its general agent fully 
accredited to transact the firm business in the ordinary way. 
By the principles of agency, this means that the other parties 
composing the firm are individually bound by the acts of said 
partner when he is acting for the firm within the scope of the 
authority conferred by the nature of the business carried on. 

This implied authority may be restricted by agreement be- 
tween the partners, but such restrictions upon his authority do 
not affect the right of third persons to deal with such partner on 
the firm business, unless such persons have notice of the restric- 
tions. A difficulty is presented here, since no rule can be laid down 
to determine the question as to whether a certain act is necessary 
in the transaction of a business, and so within a partner's implied 
authority. Hence each case must be determined by the nature 
of the business and the customs of persons engaged in it. 

278. There are, however, certain things which it is well 
settled a partner may, and others he may not do. A partner 
has power to bind his firm by appointing agents, selling chattels, 
receiving bills of exchange; and in trading partnerships, he has 
the power to borrow money necessary to carry on the firm busi- 
ness, sign notes, endorse negotiable paper in the firm name, and 
to mortgage and pledge personal property. But he cannot bind 
the firm by making a firm assignment for the benefit of creditors ; 
nor make a guaranty in the firm name; nor make a mortgage, 
deed, or lease of realty. 

In accordance with the foregoing, it is plain that a partner can 
bind the firm upon simple contracts which are within the scope of 
the firm business, both as to buying and selling, though he can- 
not sell all the firm property so as to terminate the partnership. 

161 



§ 279 CONTRACTS 

The rest of the firm can only escape liabiHty upon such contracts 
of buying and seUing by giving previous notice of their dissent to 
the party with whom the contract is about to be made. This 
accords with the principle of agency that a principal may revoke 
his agent's authority before the intended act is done. Otherwise, 
the remaining partners will be bound. 

Where a partner pledges the firm credit for a purpose apparent!}- not con- 
nected with the firm's ordinary business, the firm is not bound unless he is 
in fact authorized by the other partners; but this does not affect any personal 
liability incurred by him individually. 

Persons who have notice or reason to believe that the thing done in the 
firm name is for a private purpose, or on the separate account of the person 
doing it, cannot say that they were misled by his apparent general authority. 
The simple reason is that his authority exists for the benefit and general pur- 
poses of the firm and not for the benefit of its individual members. The 
commonest case of this, perhaps, is where one partner gives notes of the firm 
or other firm securities to raise money for private purposes, or to pay his 
private debts. If the person so lending has notice of the want of authority, 
he cannot sue the firm for it. 

279. PARTNER'S LIABILITY. — Co-extensive with the 

partner's powers, and possibly of even greater importance, is the 

partner's liability. This is said to be '' joint," unless the articles 

expressly impose a '' several " liability, or unless the partners are 

made jointly and severally liable by statute, as is quite generally 

the case. *' Joint" and " joint and several " are technical terms 

of weighty import. 

To illustrate: Suppose a firm of three persons incurs a firm debt of S3 ,000. 
The creditor can look for satisfaction not alone to the firm property, but also 
to the individual property of the partners. He may proceed to sue the part- 
ners individually without first exhausting the firm assets, should he elect to do 
so. Now if the liability of the partners was "joint" only, then each would be 
liable to pay SI, 000, and no more. Hence if two had property, and the third 
had none, the firm being insolvent, the creditor could get only $2,000. But 
if the liability is "several" as well as joint, the creditor can at his pleasure 
select any one or more of the partners, and hold him or them for the whole of 
the firm debt. Suppose one is so chosen and that the other two possess no 
property. Of course a judgment against the irresponsible partners, if ob- 
tained, would be valueless. 

A little consideration will show that this joint and several 
liability is almost the central fact in the partnership status. It 
also serves to show clearly that the existence or non-existence of 
a partnership may in a given state of facts spell the financial ruin 
of an individual. 

280. Here also, it appears clearly, is one of the foremost dis- 
tinctions between a partnership and a corporation, since the liability 
of the corporation stockholder is generally limited to the price of 
his shares. (See § 2G0.) Therefore he may lose that amount, 

162 



CONTRACTS OF ASSOCIATION §281 

and frequently does so because of a lack of adequate capital to 
prosecute the enterprise ; for want of sound business management 
of the corporate affairs, etc., etc. But when his money is gone, 
that is the end of his liability. 

On the other hand, the partner who is financially responsible, 
but has dishonest or incompetent associates, is by no means so 
well off, since each partner in a general partnership is individually 
liable for the whole amount of the firm debts, whether he is able 
to pay them or not. (§ 279.) This liability begins when the 
partnership is actually formed, even though the articles are not 
executed until later. 

Torts. — The firm's liability extends also to torts (see § 156) 
committed by one partner if the firm has authorized such tortious 
act, or has in any way joined in its commission; or when they 
have adopted it, either expressly, or retained the benefits thereof; 
and also if committed by a partner while acting in the ordinary 
scope of the partnership business and as a part of his employment. 
This is but another illustration of the principle of agency that a 
principal (the firm) will be liable for the torts of his agent (the 
partner). Torts which may be mentioned in this connection are 
trespass, fraud, and committing a nuisance. 

281. Termination of Liability. — The liability of a partner 
with reference to future acts of his co-partners is terminated by 
the firm's dissolution by operation of law, as by the bankruptcy 
of a partner, or a dissolution by act of the partners, when proper 
notice thereof has been given to the public and to prior dealers 
with the firm. Then those who deal subsequently with the firm 
will have notice that they cannot rely upon the financial responsi- 
bility of the retiring partner. 

The liability of the partner for the past acts and obligations of 
the firm is terminated by payment or settlement of them by the 
firm ; or by a partner for the firm ; or by a release to the firm or 
to any member thereof; or by a new contract made to supersede 
the old obligation, assented to by the creditor. It should be 
added that if a firm passes through bankruptcy, and is discharged 
by the Federal Court, no actions can subsequently be maintained 
against the partners for previous obhgations of the firm, irre- 
spective of the percentage paid upon the claims at liquidation. 

It should be carefully observed that a partner is not released 
from prior obhgations of the firm, merely by reason of dissolution; 

163 



§ 282 CONTRACTS 

unless by the consent of all the parties in interest ; or unless the 

obhgation is assumed by the remaining partners, or disposed of as 

already suggested. 

If a partner is sued for a private debt not connected with the firm business, 
his interest in the partnership may be reached through an equitable action 
amounting to an attachment and sale upon execution. Yet the purchaser 
who buys the partner's interest merely succeeds to the rights of the partner, 
i.e. to a'share in the surplus, if there is one, after the payment of all firm debts. 
Hence the buyer, in such a case, is likely to get a doubtful bargain unless he is 
familiar with the condition of that particular firm and feels confident he will 
recoup himself from the surplus ascertained at the accounting. 

282. PARTNER'S INTEREST. — A partner's interest in 
the firm property simply entitles him to a given proportion of 
what remains of the assets after all the firm debts are paid. It 
follows, therefore, that no partner has ownership of an undivided 
share in the firm property. That is, he could not demand, in a 
firm of three, that one-third of all the firm property should be 
separated and set aside as his private or individual property. 
However, it is law that a sale of firm property by one partner 
passes the whole title. 

283. Partner's Lien is another phase of the partner's interest 
worthy of notice, since it is frequently very valuable, especially 
if a partner has associated himself with what proves to be bad 
company. 

Suppose partner A has property but partners B and C have none. B and 
C are charged with the management of the business and with intent to defraud 
or injure A, willfully refuse to apply the firm property or assets to the firm 
debts, A cannot escape liability because of the joint and several rule already 
alluded to (§ 279). But A has what is called a ''partner's lien" or "partner's 
equity," by which he can at equity force B and C to apply the firm assets to 
the payment of the firm debts before recourse is had to the partners individu- 
ally. This right does not affect third persons doing business with the firm, 
but is merely a protection for a partner against his unrighteous co-partners. 
Of course, if there is no firm property to apply then this "lien" will not be 
worth much. 

284. Partner's Recompense. — A partner is not entitled to 
compensation for services rendered the firm (i.e. wages or salary, 
unless by an express agreement), even though he has been more 
active than his co-partners in pushing the firm business. But 
where he has incurred expense or personal liability on behalf of 
the firm in the usual and ordinary conduct of its business, then he 
must be reimbursed by the firm. 

285. DUTIES. — It is a partner's duty to exercise reasonable 
skill and diligence when he acts for the firm, and he is liable to his 
partners for any loss caused by his default iu this respect. It is 

1G4 



CONTRACTS OF ASSOCIATION §287 

their duty to exercise the utmost good faith toward each other at 
all times. On this theory the parties are absolutely free to choose 
whom they will associate with (called the doctrine of ^'delectus 
personalis,'" see § 240-[ 1]), since the relationship must of necessity 
be one of mutual trust and confidence. In accord with this 
principle, it is a general rule that all profits accruing to one 
partner by reason of his individual transactions concerning firm 
interests, or which in any way compete with firm interests, or 
profits which he is able to make solely because of his connection 
with the firm, must be accounted for to the firm. A partner can- 
not buy for himself from the firm, nor from himself for the firm, 
nor in any way make his and its interests antagonistic. No ser- 
vices will entitle him to compensation, other than by a division 
of profits ; and this is generally held to apply to a surviving 
partner winding up firm business. (§ 275.) If a partner enters 
into a rival business, or uses firm money for other purposes, he 
must account to his co-partners for the profits. 

LIMITED OR SPECIAL PARTNERSHIPS 

286. A limited partnership is one that is composed of one or 
more general partners (who are governed by the usual rules as to 
their powers, duties, and liabilities, see §§ 266-285), and one or 
more special partners who have placed a specific sum in the 
business and may lose that, but are not liable further. 

Limited partnerships were unknown to the common law, and 
can exist only when authorized by a statute, whose provisions 
must be strictly complied with. Their chief object is to enable 
capitalists to employ their wealth in trade or other enterprises 
without taking an active part in the management of the business, 
and without risking more than the amount originally subscribed. 
The formalities which must be observed are more like the organ- 
izing of a corporation than of an ordinary partnership, but should 
the statutory requirements not be strictly complied with the 
special partner may lose his exemptions, and become in fact but 
a general partner, with the liabilities of such. The creation of 
limited or special partnerships thus permits the co-operation of 
men whose chief possessions are integrity and ability with those 
possessed of ample financial means. 

287. Though the right to create such partnerships exists in 
all the States, it is but little availed of, so prevalent has the [[ cor- 

165 



§ 288 CONTRACTS 

poration habit " become. Where the enterprise is not sufficiently 
important to warrant the launching of a corporation, the hmited 
partnership is a most useful form of organization. 

In the creation of hmited partnerships, the statutes generally 
require the execution and filing of a certificate stating: 

(1) The firm name. 

(2) The general nature of the business to be transacted. 

(3) The names of the partners interested, distinguishing the general from 
the special, and giving the residences of each. 

(4) The amount of cash contributed by each special partner. 

(5) Dates of commencing and of terminating the partnership. 

288. Another important fact is that the special partner must contribute 
actual cash, and this must be paid in before the certificate (corresponding to 
the "articles") is filed. An honest intention to pay in the money at or before 
the time appointed for the commencement of the partnership cannot remedy 
the defect if the money was not actually paid in when so alleged upon filing 
the certificate. The object of this provision is to protect the public by provid- 
ing a fund upon the day the partnership is formed, to be subject thereafter 
to no contingencies or losses, except those which come from the proper busi- 
ness of the partnership. 

Though the general partnership theory is that people deal with 
a firm solely upon the individual credit of its members, the special 
partner creates a fund to which third persons can look, which 
gives credit to the whole aggregation. Thus moneyless persons 
who possess the requisite skill and knowledge are not prevented 
from embarking upon profitable ventures. It is perhaps no more 
than just, also, that as the special partner is not in a position 
to share in or direct the management, he should have his Habihty 
limited to his original stake, the same as though he held shares 
in a corporation. 

The business is generally conducted in the names of the 
general partners, and the statute may require all the names of 
the general partners to appear in the firm name or be displayed 
where the business is conducted. 

A special partner risks only his contribution. He has no title 
to the firm assets, and nothing can be taken on execution by his 
separate creditors. He can buy of the firm and sell to it. He 
has priority over the other general partners in the distribution of 
the surplus upon winding up. 

289. The NAME of a limited partnership is frequently of 
prime importance. By statute, it may be provided that the 
name shall contain the word 'i Limited " ; that it shall not contain 
the words, " & Co." ; nor the names of the special partners upon 
penalty of their becoming general partners. Except as indicated, 

1G6 



CONTRACTS OF ASSOCIATION §292 

nearly all that has been said in reference to general partnerships 
applies equally to limited partnerships. 

JOINT-STOCK COMPANIES 

290. A joint-stock company is an association partaking of the 
nature of a partnership and of a corporation. It is formed for 
purposes of profit, and possesses a common capital contributed 
by those who compose it. This capital is commonly divided into 
shares of which each member owns one or more. 

The members of a joint-stock company are liable as partners, 
while their shares are freely transferable like shares in a corpora- 
tion. In a partnership, if a member transfers his interest, ipso 
facto the firm is dissolved, but nothing of the sort happens in a 
joint-stock company. Because of the intimate relation (see 
§ 285) no one can become a general partner without the consent 
of the other members ; in joint-stock companies consent or assent 
of the other members is immaterial. If a member retires, how- 
ever, he must give notice in order to terminate his liability, as in 
an ordinary partnership. (See § 273.) 

291. The powers of members are the same as in an ordinary 
partnership, unless the management of the business is entrusted 
to officers similar to those of a corporation. Such officers have 
the ordinary powers of partners, unless there are restrictions which 
are brought to the notice of persons dealing with the company. 
The balance of the shareholders have no power to act for the 
company. 

The liabilities of members in a joint-stock company locate it 
definitely as a partnership rather than as a corporation, since in 
the absence of statutory limitations, the members are liable for 
the whole amount of the company's indebtedness. As to the 
relations among themselves, the rights of the partners are the 
same as in an ordinary partnership. 

292. If a joint-stock company is organized under statutory 
provisions, as many are, it approaches closely to being a cor- 
poration and is considered to have an existence distinct and apart 
from the members who compose it. It then has a perpetual 
existence like a corporation, unless agreed otherwise ; it may take 
and hold property, and enter into contracts in the associate 
name; the management is in a Board of Directors; and if sued, 
the members are not liable until the Company's property is wiped 

167 



§293 CONTRACTS 

out, the action which it is possible to take against the members 
being considered supplementary to the liability of the company. 
This is the status in neither partnership, nor corporation, as we 
have seen. 

Furthermore, in every case, the joint-stock company, even 
though organized under a statute, owes its existence not to the 
sovereign power of the State but to the agreement among its 
members. 

293. DISSOLUTION. — A joint-stock company may be dis- 
solved by the mutual consent of all the members, or under the 
circumstances provided for in the articles of association. If 
organized for a definite term, there must be unanimous consent 
to dissolution, but a court of equity may dissolve such a company 
for good cause shown in a suit begun by any of the stockholders 
for that purpose. 



168 



QUt:STlONS 

Questions for Study and Review on Chapter VI 
CORPORATIONS 

1. Why should an engineer know something of corporations? 

2. What is a corporation? How regarded in law? 

3. Suppose a person becomes sole owner of the stock in a corpora- 
tion; what is the effect upon the corporation? How must he convey 
its land? 

If.. Where is a corporations domicile? Why is the question im- 
portant? 

5. What kinds of corporations are there? Enumerate those 
called " civil.'' 

6. Compare methods of acquiring membership in partnerships 
and in corporations. 

7. How does the death of a member affect each type of association? 

8. Referring to the agency powers of members compare a partner- 
ship and a corporation. 

9. With regard to liability for the Com^pany's debts, in which of 
them would you prefer to be a member? Explain why. 

10. The existence of a corporation and of a partnership rests 
upon certain contracts. Who are the parties to the contracts in each 
case? 

11. Can one stockholder in a corporation sue another? Is it the 
same with partners? Can you tell why there is a difference? 

12. Name other formes of association besides partnership and 
corporations. 

13. What are the test questions for proving the existence of a cor- 
poration? 

14' What are the three essentials to the formation of a corporation? 

15. What was the direct effect of the Dartmouth College case 
upon all corporation charters subsequently granted? What con- 
stitutional question was raised? 

16. What is a '^ promoter "f Is the future corporation liable 
upon his contracts? 

17. What will be the effect if the promoter perpetrates fratid? 

18. What is the effect of non-compliance with the statutes in 
respect to subscriptions, or other requirements? 

19. How were corporations formerly chartered? How at the 
present time? Why? 

20. What is the general procedure in forming a corporation? 

169 



CONTRACTS 

^1. For what docs the charter serve? What is the leading 
" rule of construction^^? 

22. What is the scope of the doctrine of implied powers? 

23. Name some of the common implied powers of a corpora- 
tion. 

24. The common law powers of a corporation necessarily follow 
its creation as a corporation. Name the principal ones. 

25. What is meant by "ultra vires"? Why is an "ultra vires'' 
contract invalid? 

26. What limits are now placed upon the doctrine of "ultra 
vires'^? 

27. Under what conditions will the claim of "ultra vires'' fail 
of recognition? 

28. Explain carefully the meaning of " estoppel." When is 
it applicable to corporation contracts? 

29. What are some of the things a corporation commonly can 

NOT do? 

30. How, or by whom does a corporation transact business? 

31. What are a director's duties as to the application of cor- 
porate funds? 

32. Can he contract with himself personally? Why is this? 
S3. What is the extent of a corporation's liability in tort? Illus- 
trate. 

34. How are corporations generally dissolved? Name the 
other modes. 

35. Is there any difference between " capital " and " capital 
stock "? If so, what? 

36. Recite upon the contract of membership between stockholders. 

37. State the difference between a share of stock ajid a stock cer- 
tificate. 

38. Which would you prefer to own, common or preferred stock? 
Tell why. 

39. Explain the terms " full-paid " and " bonus " stock? Is 
there any difference in the owner's liability for each? If so, what? 

40. When may assessments be levied upon stockholders? 

41. Explain what you understand by " stock-watering." What 
is its object and result? 

42. In general, what are stockholders' liabilities for corporate 
debts? 

43. Recite upon special statutory liability. 

170 



QUESTIONS 

^.I^.. When will the directors he personally liable for corporate 
debts? 

Jf.5. What are a stockholders rights to transfer his stock? Any 
exceptions? 

^6. What is the rule with reference to holding stock in other com- 
panies? 

47. Give a definition and state the objects of public corporations. 

48. With which of a city's charter powers is the engineer most 
likely to have to deal? 

49. What about fires, city fire departments, and the acts of the 
city's servants? 

50. Recite upon the city's water supply. 

51. What is the leading restriction imposed upon m^unicipalities? 
Can you tell why? 

52. How will the city debt limit affect its liability in tort? Or 
on a contract calling for payments in excess of it? 

53. Name some of the torts for which the corporation is not held 
liable. 

54' How is the rule as to lateral support applied to city 
streets? 

55. What is a municipal corporation' s liability as to the con- 
dition of its streets? What about insurance against accidents? 

56. How is it liable with reference to surface water disposition, 
and streams? 

57. What is the extent of its liability in regard to sewers and 
sewer systems? Cite an illustrative case. 

58. A, B, and C are in partnership. Learning that in a cor- 
poration there are less individual liabilities, they decide to form one, 
draw up articles of association, and thereby believe they are a cor- 
poration. 

X is a partnership creditor; the corporation {if there is one) has 
not enough property to satisfy the debt to X. (a) Can X collect, 
and if so, from whom.? (b) Suppose A owns private property, but 
B and C have none. What result then? Give your reasons in both 
cases. 

59. (a) M is a partner in the firm of M., N. & Co., and agrees 
to sell his interest therein to T in consideration of T's transferring 
to him 20 shares of United States Steel stock. Is this arrangement 
legal and binding? Explain why, or why not. (b) Suppose X is 
a principal creditor of the M. N. Co., which has no partnership 

171 



CONTRACTS 

assets, and thai M has private property, while N has none. 
Then in the above case, can X collect from Tf If not, then from 
whom? 

60. The A. B. Co. is a corporation, chartered " for the purpose of 
making, buying, selling, and dealing in brick," etc. Later, finding the 
brick business poor, the directors decide to purchase a foundry and 
machine works with the corporate funds, and to embark upon the 
manufacture of gas engines. The sale is to be on January 1, 1910, 
but that date is allowed to pass, and on March 1, the Machine Co. 
sues the Brick Co. for breach of contract. Can they recover? Why, 
or why not? 

61. Suppose a corporation is organized for the purpose of doing 
railroad construction work by contract. Can it lawfully borrow 
money with which to speculate on margins in the stock market? Give 
your reasons. 

62. (a) Why are general statutes framed to cover the organization 
of corporations? 

(b) What things can a corporation commonly not do? 

(c) How should a corporation be described when it is a grantor 
in a deed? 

63. (a) What is a share of stock? (6) What is a stock certificate? 
(c) In order to be a shareholder, which must one own? (d) What is 
a foreign corporation? 

64. (a) How is membership in a non-stock corporation acquired? 
How in a stock company? (6) How may corporations be dissolved? 
{c) In what form should corporation contracts be executed? 

65. (a) How is membership in a corporation proved? (b) What 
rights have creditors against the shareholders in a corporation? 

66. Explain the functions of directors in a corporation. Are 
they liable upon the contracts they make in behalf of the corporation, 
and if so, when? If not, tell why. 



PARTNERSHIP 

1. Give some of the reasons for forming partnerships. 

2. Explain briefly what is meant by a partnership, and state 
its basis. 

8. Who cannot become partners? Why is this? 
4. Name the principal matters usually covered in partnership 
articles. 

172 



QUESTIONS 

5. What is the meaning of a *' partnership by implication "f 
Are the obligations under it as binding as in one formed by express 
agreement? 

6. How may one become a partner by a '' holding out "f 

7. Explain the test for determining the existence of a partnership 
when there are no partnership articles. 

8. What evidence is usually looked to when proof of a partner- 
ship is desired? Is this conclusive? 

9. Give an original illustration of a joint enterprise. Dis- 
tinguish it from a partnership. 

10. What is the rule as to partnership profits? Discuss '' in- 
tention.'' 

11. What are the principal remarks made upon firm, nam^? 
Explain '' good will.'' 

12. Outline the case under " Notice and Firm Name." Does 
it appear reasonable and proper to you? 

13. What is the importance of firm, name with reference to real 
estate? 

14. What determines the duration of a partnership? What acts 
will terminate it? Can this effect be provided against, and if so, 
how? 

15. When will equity decree a dissolution? 

16. What is meant by [^ winding-up " a business, and who does 
it? When? 

17. What are the partners' duties upon dissolution? 

18. What sorts of partners are there? Name at least four. 

19. Explain the standing of the various partners called for in 
Question 18. 

20. Name the m^st prominent feature of an individual partner's 
powers. 

21. Tell the bearing of this in his relations to outsiders. 

22. What things may a partner not do? What can he do? 

23. What is the extent of a partner's liability for firm debts? 

24. Explain " joint and several " liability. 

25. Compare a partner's liability and that of a corporation stock- 
holder. 

26. What is the liability of a partnership in tort? 

27. When is a partner's liability terminated? 

28. How may he terminate it with reference (a) to future acts of 
the firm? (b) As to past obligations? 

173 



CONTRACTS 

29. What is the effect of a discharge in bankruptcy upon the 
firm's debts f 

30. What is a partner's interest in a firm (a) as to net proceeds? 
(b) As to firm property? 

31. When would you care to attach a partner's interest, and what 
would you get by it? 

32. Tell what is meant by a " partner's lien." When is it 
useful? 

33. State the rule as to a partner's compensation and reimburse- 
ment. 

34. What are a partner's duties as to good faith and negligence? 
Illustrate. 

36. What is a limited partnership? Explain the status of a 
special partner. 

37. State the object in forming limited partnerships. Why is it 
but little done? 

38. Suppose statutory requirements are not strictly complied 
with, — what is the effect upon the special partner? 

39. What about '' prospective " capital in a limited partnership? 
What is the object of the rule? Name other statutory requirements. 

4.0. Is this a desirable form of association? Why? 

41. What are the leading facts as to the status of a special 
partner? 

42. What is the importance of the name in a limited partnership? 
Why? 

43. Does a joint-stock company most resemble a partnership or 
a corporation? State the points of resemblance to each. 

44- What about liabilities of members and transferability of 
stock? 

45. How is a joint-stock company managed? 

46. Does a joint-stock company which has been organized under 
a statute require a charter? Why? 

47. How does such an association come to an end? 

48. In a firm of three partners, two object to the signing of a con- 
tract, a fact which the other contracting party knows. Nevertheless 
he signs a contract with the third partner. Is the contract enforce- 
able? Tell why, or why not. 

49. Upon forming a firm, A put in $5,000, B, $1,000, and C, 
his skill. After all the firm creditors have been paid, the firm has 
lost $1,000, and in addition, A has loaned the firm $1,000. Show 
how you would adjust the accounts in winding up the business, 

174 



Chapter VII 

CONTRACTS OF SALE AND 
TRANSPORTATION 

The commercial world is roughly divided into two classes, — buj'^ers and 
sellers. Their mutual relations rest solely upon contracts. Because of 
the subject matter's universality, and the multitudinous instances of 
selHng, the law of Sales is by no means easy. The shading between its 
rules is often subtle, and tracing the title and right to possession is often 
highly difficult. Yet as a business-man and buyer of commodities, the 
engineer should appreciate their importance, and will profit by their 
cognizance. 

If the seller selects goods, delivers them to a common carrier, and 
they are lost before reaching the buyer, who must stand the loss? If the sel- 
ler in good faith ships goods to a customer whom he subsequently learns is 
insolvent, must he idly see his consignment enrich the other creditors? 
Or does the law assist him to protect his own interests? If the goods 
have changed hands, and the title is unquestionably in the buyer, what 
rights has the unpaid vendor? And suppose fraud , in any of its numerous 
forms, enters the transaction, — where do the parties stand? 

When goods are placed in the hands of a common carrier, and he agrees 
to transport them, what are the responsibilities, immunities, and privileges 
which thereby accrue to him? Must the carrier provide abundant 
facilities? What if he makes a mis-delivery? Has he any claim upon 
the goods for his unpaid charges? 

These questions, and others equally important, are treated in this 
chapter. The average business man will find them useful, as well as 
the engineer and contractor. 

SALES 

294. DEFINITION. — A sale is the transfer of the property 
in a thing for a price in money. * As the transaction is a contract, 
all the rules of contract apply. There must be competent parties, 
a proper subject matter, the title to which is in the seller, an 
agreement to transfer the property, and a sufficient consideration, 
i.e. the payment or agreement to pay a price in money by buyer 
to seller. The following transactions resemble sales somewhat, 
but are different. 

A bailment where one merely keeps possession for another, no 
title passing; a consignment, title remaining in consignor, con- 
signee being an agent, merely ; exchange or barter ; a lease (though 

* By the Sales Act (a codification of the greater portion of the common 
law on Sales which has been recently [1910] enacted into statute law by many 
of the States) it is provided that the price may be paid in any personal property. 
This was called " barter " at the common law; the ancient and customary 
definition of a sale was as given above. 

175 



§295 CONTRACTS 

where there purports to be a lease which is really a sale with pay- 
ment by instalments, title to pass on completion of payments, it is 
generally held to be a sale in fact) ; a mortgage; and a pledge. 

295. GENERAL CHARACTERISTICS. — Sales are classified 
as (a) executed J whe e the title passes instantly, and in the present 
upon formation of the contract of sale ; and (6) executory, where it 
is agreed that title shall pass at some time in the future, upon com- 
pletion of the subject matter, or upon performance of a condition. 
The intention of the parties, as in other contracts, will often show 
whether a given sale is executory or executed. 

The rules on competency (see § 23) to contract are the same 
here as in contracts generally, except that where necessaries are 
sold to an infant, lunatic, or drunken person, he must pay a reason- 
able price therefor. There must be mutuality, also. The parties 
must have in mind the same thing at the same time, intending to 
bind themselves by a bargain mutually agreed upon, and the 
offeree must make his assent known to the offeror. 

Thus where a person was to buy a horse if warranted " sound and quiet 
in harness," the horse was delivered with the warranty that it was " sound 
and quiet in double harness," it was held that the assent was not mutual. 

Generally no formality is required in the contract, as it may be 

oral, w^ritten, or it may be implied from the conduct of the parties. 

All will be equally binding unless the Statute of Frauds (see § 299) 

requires writing in the particular instance. 

296. SALE by NON-OWNER. — Where the goods have been 
stolen, the thief of course has no title to the goods and cannot 
pass any. But if the goods are obtained by fraud, the title ac- 
quired will vary according to circumstances. 

Suppose A gets goods by pretending to be X. He gets no title and can 
transmit none; but if the party defrauded really intended to pass the title 
to the person dealt with, though the seller was in some respects deceived, 
still the fraudulent buyer can pass a good title to an innocent purchaser 
before the first seller rescinds the contract. The last buyer must act in good 
faith, and without notice of the defect in the title. 

297. Cases where a non-ounier may sell are: — 

A pawn-broker may sell articles unredeemed at the appointed 
time ; a sheriff may pass good title to property upon an execution 
sale; factors, brokers, and other agents, may give good title, 
though they possess none personally. But in general, if the seller 
has no title, or no authority to sell, there is a failure of considera- 
tion, and money paid by the buyer may be recovered. 

298. GOODS NOT IN EXISTENCE. — Unless the property 

176 



CONTRACTS OF SALE AND TRANSPORTATION §300 

intended to be sold is in existence at the time of making the con- 
tract, there is no sale, but only an executory contract to sell, and 
some further act or circumstance must occur before the title passes. 
Neither is there a contract if the subject matter has ceased to be 
the seller's property. 

Thus, in a case where A sold a cargo of corn loaded upon a vessel that 
had not yet arrived, the master of the vessel, finding there was danger of 
the grain spoiling, had sold it a month before the agreement between A and B. 
There was no contract. 

What really happens in a contract for the sale of goods not yet 

in existence is that the parties agree to sell and pass title later. The 

rule preventing such a contract is to a certain extent avoided by 

saying that an object that is certain to come into existence may 

be made the subject of a present sale, as the unborn young of 

animals during the period of gestation ; the fruits of the soil, etc. 

Of course if the things have passed out of existence, there can be no 

sale because of impossibility of performance, as in the grain case. 

299. STATUTE OF FRAUDS (A. D. 1677) is the name of a 

general English statute with 
numerous provisions designed to prevent frauds and perjuries. 
The Seventeenth Section of the statute appHes especially to sales, 
and is in general force throughout the United States to-day. This 
Statute provides that in all contracts for the sale of " goods, wares, 
and merchandise " of more than $50 value (Sales Act makes 
amount $500 in some States), there shall not be a binding con- 
tract unless certain requirements are compUed with: 

(1) The buyer must receive and actually accept part of the 
goods sold ; or 

(2) He must give something to bind the bargain, or in part 
payment; or. 

(3) There must be some note, or memorandum in writing refer- 
ring to the bargain, made and signed by the party to be charged, 
or by his duly authorized agent. 

300. The Statute is held to apply to executory as well as to 
executed contracts of sale, but not to contracts for work, labor 
and materials. Though apparently simple, this classification is 
not easy to work out in every case. The EngHsh and the Massa- 
chusetts rule, most commonly followed, is that where the parties 
intend to transfer the title in a particular chattel, though it is to be 
the product of the work, labor, and materials of the seller, then the 
Statute applies, — i.e. the contract to be binding must be made 

177 



§301 CONTRACTS 

in accordance with its terms. Thus if a cabinet-maker manu- 
factured a special piece of furniture in large quantities, all being 
of the same pattern, price, and quahty, an order for one of them 
would be '' within the Statute." That is to say, these articles 
would fall within the category " goods, wares, and merchandise." 
But if special variations as to workmanship, materials, or otherwise 
were to be introduced for the buyer so that the thing could be 
said to be manufactured for him, then it is a contract for work and 
materials, and hence not within the Statute. 

301. The foregoing distinction may appear academic. The 
following illustration will show its practical importance, the facts 
being substantially those of a Massachusetts case. 

X, a carriage manufacturer, was the plaintiff. B was a customer who 
visited the shop and bargained with X for a certain unfinished carriage, 
specifying and selecting the color of upholstery; the particular trimmings 
which he desired; just how long he wished each coat of paint and varnish to 
be dried; and giving X the design of a monogram to be painted upon the 
carriage, etc. ; all of which X promised to comply with, and did so in due 
course. It is to be noticed that the whole transaction was verbal; there 
was no writing; B paid no earnest money, nor consideration; and of course 
he accepted no part of the goods sold. 

In due season X notified B that the carriage was ready for inspection, 
and later, that it was completed. B saw the carriage, was satisfied with it, 
and asked X to wait a little time for the money. X assented, and while 
holding the carriage in storage the carriage factory burned, destroying this 
carriage among others. 

Then X sued B for the price of the carriage, claiming that it was B's 
property, and he was merely storing the same after completion, at B's risk, 
and demanding to be paid just as though B had taken it away upon com- 
pletion. B's defense to the suit was: " Statute of Frauds," i.e. '' The Statute 
governs this transaction, and as you have not complied with it there was no 
enforceable contract of sale between us." Hence X tried to show that the 
carriage was especially built for B, and so came under the class of contracts 
for material and labor, where, as we have seen, the provisions of the Statute 
need not be observed. X's contention was upheld by the Court, as seems 
just, and the loss of the carriage fell upon B. He had to pay X the full price 
though he never received the carriage. 

302. Where the contract is for the sale of things commonly 
manufactured and supplied to the general market by the vendor, 
the contract is one of sale, — though the articles are to be sub- 
sequently made, — and not a contract to manufacture. 

Thus, suppose an order was received by a manufacturer for 200 steel 
wheelbarrows, but as he had not that many on hand, he replied that he would 
make and deliver the same during the season. This would be a contract of 
sale, and within the Statute. 

Further it is held that " entire " contracts where the value of the whole 
exceeds $50, fall within its provisions, as a sale of 100 cords of wood at $1.25 
per cord; or where the value (subsequently ascertained), exceeds $50 (or the 
statutory amount) , as where a man sells all the wood a certain lot will produce, 
and it is found that there is more than :?50 worth. 

178 



CONTRACTS OF SALE AND TRANSPORTATION §303 

By the common law, when the terms of a sale had been agreed 
upon, and the bargain struck, if the seller had nothing more to do 
to the goods, the sale was complete. As we have seen, the Statute 
of Frauds made something more necessary. 

A Common Law Sale Before 1677. In order to make the Statute of 
Frauds more significant to the student, let us imagine a sale made previous 
to its enactment. Suppose X bargains with A for A's horse; the terms are 
agreed upon and the bargain is struck; A says, "The horse is \'ours." X 
goes away, leaving the horse with A until a more favorable time for removing 
him. Then A sells the horse over again to Y who does take it away. Now 
X sues A for the wrongful disposal of X's horse. Plainly he should win, 
because there was a genuine transaction between X and A. 

Next suppose that X had never bought the horse, but that he falsely 
accuses A with having wrongfully disposed of X's horse. A will of course 
deny the accusation, and say that X never owned the horse which A sold to 
Y. Then X brings perjured witnesses, and perhaps succeeds in making out 
his case against A. It will be seen how disastrous to security in one's property 
rights the activities of such a band of blackmailers might become. The 
Statute of Frauds specifies the several kinds of evidence of the sale some of 
which must now be shown, and says that no other sort will be accepted. 

303. SATISFYING THE STATUTE. — Rule (1). "The 
buyer must receive and actually accept part of the goods sold." A 

person may accept goods to the extent of suffering them to come 
to or be left at his residence or place of business, and yet not 
'' accept '' them as contemplated in the Statute, for it is held that 
the buyer must assent that the goods remain and be taken by 
him as performance of the contract. 

According to the party's interest it may be contended that 
there was a delivery and acceptance sufficient to satisfy the 
Statute, thus rendering the contract enforceable,, while the buyer 
might claim he never received the goods. Such was a case in 120 
Mass. 290, viz.: 

Defendant went to plaintiff's store and bargained orally for certain 
leather. A fortnight later he again went to the store, weighed, examined, 
and separated this leather from the stock, to be taken away when paid for. 
Though they waited for the defendant six months, and would not permit 
him to take away the leather without paying for it, yet when their store 
burned, destroying the leather, the plaintiff sued the defendant for the price. 
The plaintiff claimed that the goods belonged to the defendant, and that 
there had been a " constructive " delivery to him sufficient to satisfy the 
Statute. But this the Court would not allow. Hence the defendant did not 
have to pay. 

Rule (1) will especially apply if the contract is for goods not 
ascertained when the contract is made. Upon receipt of such 
goods the buyer has a reasonable time in which to examine them, * 

*The Sales Act, Sec. 48, regulates this with reference to C. O. D. sales, 
and gives no right to examine unless by special agreement. 

179 



§ 304 CONTRACTS 

but if he deals with them as though he had in fact accepted them 
by making a resale, for example, this will be an acceptance. 

304. Acceptance may be consummated both by manual trans- 
fer of possession, or by agreement without actual delivery of the 
goods. Receipt -by agreement, or '' constructive delivery " as it 
is called, often presents problems not easy of solution, since the 
goods may : — 

(a) Remain in the possession of the seller, while he becomes 
the buyer's bailee, — he merely retains custody of them for the 
buyer ; 

(6) Be in the possession of a third person as bailee of the seller, 
and the third person becomes bailee for the buyer, with the con- 
sent of the seller ; or 

(c) Be in the possession of the buyer who is holding them as 
bailee for the seller, and who with the seller's consent, begins to 
hold them as owner. 

The title passes by reason of the agreements between these 
parties, and the difficult part of the problem is, in a comphcated 
set of facts, to tell just where the title is at a particular moment. 
Upon the answer, the question of the ownership, or the loss, of 
much valuable property may depend. 

An illustration of the case under (a) might be where the parties go to 
the seller's warehouse, and select the goods, but the seller agrees to keep 
custody until some time when it is convenient for the buyer to remove them; 
nevertheless, the title to the goods is in the buyer, 

(6) Suppose a commission merchant has purchased a car-load of lumber, 
and, having arrived at the freight yard, it is being held as the merchant's 
property. Without removing the lumber, the merchant sells it to X, endorses 
the bill of lading which X takes to the freight-office. The Company then 
assents to holding the lumber for X until it is convenient for him to unload 
and release the car. 

{c) A warehouseman has goods in storage for A with a right to sell such 
of them on commission as he can. Suppose he buys them himself, — he thus 
succeeds to absolute title, in addition to their custody. 

305. Rule (2). Binding the Bargain, or Part Payment. — 

'^Earnest Money ^^^ as it used to be called, is something of value, 
not forming part of the purchase price, given to mark final assent 
to the bargain. Part payment is the delivery of money or any- 
thing of value, offered and accepted as such between the parties, 
and may be made at the time or subsequently to making the con- 
tract of sale. It is analogous to paying something as consideration 
for keeping an option open. 

The price may be paid at once, or at some future time agreed 
upon. The terms (price) may be expressed in the contract, but if 

180 



CONTRACTS OF SALE AND TRANSPORTATION §307 

not, the reasonable value of the goods is presumed to have been 
understood ; sometimes certain persons are designated to name the 
price, — the sale is not complete, and title does not pass until the 
appraisers have acted (for this is a condition precedent). 

306. Rule (3). The Memorandum. — The third provision of 
the Statute of Frauds requires some memorandum in writing to 
witness making the contract of sale, unless it is rendered unneces- 
sary by the fulfillment of provisions (1) or (2) just discussed. The 
wisdom of this rule is apparent, as it prevents disputes when other 
evidence to the transaction has disappeared. 

No especial form is required for this memorandum so long as it 
contains the essential terms of the contract, and is signed by the 
party to be charged, or his agent. The seller need not sign since 
the document will naturally be in his possession as the evidence 
upon which to bring suit, if necessary. The memorandum should 
state clearly the names of the parties, distinguishing the buyer 
from the seller ; the price, if any has been agreed upon ; a descrip- 
tion of the goods sold; and also any other material terms of the 
contract. 

The effect of non-compliance with the Statute is that a Court 
will not recognize the contract. Of course numberless contracts 
are made daily, where the Statute is not complied with. So 
long as the parties live up to their oral or implied agreements, no 
particular harm is done. The discussion has been given to show 
what formalities must be observed in case one party is obliged 
legally to enforce his rights against the other. 

307. WHEN DOES TITLE PASS? — Generally in a sale 

of specific goods, the 
title passes when the parties intend it to pass ; and unless they de- 
clare or show that they intend otherwise, it will be presumed that 
they intended it to pass when the contract was made. Where the 
elements of an executed contract of sale are present title passes hn- 
mediately, whether possession does or not. The difficulty is in 
telling whether a contract is an executed one or not. 

By referring to § 295 the essential meaning is seen to be that 
an executory contract of sale takes effect in the future when some 
condition precedent has been performed. 

This is where the seller is bound to do something to the goods for the 
purpose of putting them into marketable shape. Illustrations: cotton to 
be ginned and baled; grain to be threshed; or where the seller is to weigh, 
measure, or test the goods for the purpose of ascertaining the price, or to 

181 



§ 308 CONTRACTS 

find whether they are equal to a specified grade or quality. Then the property 
does not pass until the specified act is done. 

The effect is that where the contract of sale designates a specific 
chattel, as such and such a pump, or stone-crusher, if the buyer 
agrees to take the article and to pay the stipulated price, then 
title passes instantly, no matter where the possession is. This is 
an executed contract of sale. 

308. SOMETHING REMAINING TO BE DONE. — As al- 
ready said, if something remains to be done to put the goods into 
deliverable condition many difficulties may arise. Frequently a 
fire or other casualty destroys or damages the property, and it is 
highly important to know who possesses the title at a particular 
moment, since the owner must bear the loss. 

Conditions to Passing Title. — Where by the contract there is a 

condition precedent to the passage of title, that condition must 

be fulfilled before the title passes. 

Thus, if a motor was to be delivered f.o.b. New York (by the teniis of 
sale), and it was lost in a train-wreck while en route from Pittsburg, the loss, 
so far as the buyer and seller are concerned, must fall on the seller. It was 
condition precedent to the passing of title that the pump be delivered in 
New York. 

Similarly, if the contract calls for delivery of a certain part of 
the goods at stated times, the buyer may repudiate the entire con- 
tract if the conditions as to delivery are not carried out. But if 
the contract is in fact separable, and not entire, the result will be 
different. If payment is to be made in installments, the last one 
must be paid before title passes. The delivery of the goods at a 
specified time and place may, of course, be made a condition prec- 
edent to the passage of title. (For a further treatment of the 
intention as affecting the passage of title see Appendix Note No. 21.) 

In an old English case, 200 bales of goat skins, 5 dozen to the bale, were 
to be sold at 57 shillings per dozen. By the usage of the trade, it was the 
seller's duty to check the count of all the skins in each bale. The skins were 
destroyed by fire before the counting was done, and it was held that the 
property had not yet passed. Therefore the loss was on the seller. 

In another case, all the bark stacked in a certain place was sold at a price 
per ton, the cost of weighing being borne jointly by both parties. A part 
had been weighed, delivered and paid for, when the remainder was damaged 
by a flood. The Court held that the unweighed residue was the property of 
the seller, even though the contract was an " entire " one for all the bark in 
the lot. 

These are English cases. Some American courts have held 
differently, saying that where nothing but weighing and measur- 
ing remained to be done, the title was in the buyer without waiting 
for these things to be done by the seller. Probably most American 

182 



CONTRACTS OF SALE AND TRANSPORTATION §312 

courts follow the English rule. There is agreement upon this 
point at least, that where the goods have been delivered to and 
accepted by the buyer, the title is vested in him. 

309. In considering sales made conditionally it should be 
noticed that the oft-recurring principle of contracts applies, viz. : 
The intention of the parties is to govern. They can make the title 
pass at any chosen time, irrespective of what acts remain to be 
done to the goods. 

310. CONDITIONAL SALES. — There is another class of 
cases where something extraneous to the chattels is to be done or 
accomplished by the buyer as a condition precedent to the passage 
of title. Until the condition is fulfilled the title does not pass, 
even though the goods are in the possession of the buyer. 

A contractor bargains for ten cars of cement conditionally upon securing 
the X. Y, Z. ontract. The ccement manufacturer or dealer wishes to close 
the trade as he supposes; or to get room in his storehouse; or believing the 
buyer is sure to get the contract, — ships the cement which arrives before the 
contract is let. Our contractor does not secure the job, however, but is sued 
by the cement man for the price of the ten cars. Of course title never came 
to him, hence he need not pay. This result is easily worked out by applying 
the elementary rules of contract law. But this does not mean that the 
contractor can retain possession of the cement, and not pay for it. 

311. Sales on Approval. — Another kind of sales upon con- 
dition is where the buyer takes possession of the chattel for trial 
or approval, the condition precedent to title passing being his satis- 
faction with, or approval of, the particular article. Though this 
is delivery, it is not acceptance sufficient to pass title irrevocably 
until the buyer signifies his approval or satisfaction. (That is to 
say, the title passes to the buyer but is subject to being re- vested 
in the seller upon the goods being returned to him.) Upon expira- 
tion of the time limited for trial or acceptance (if there is a time 
set, and failing a time limit, then upon the expiration of a reason- 
able time), the title will pass. What is a reasonable time would, 
of course, be a question of fact for a jury. 

312. SALE of UNAPPROPRIATED GOODS. — Suppose a 
dealer has twenty concrete mixers in his warehouse, and you 
agree with him to buy ten. Though the bill of sale is fully executed 
still you own no mixers until he has gone to the warehouse and 
^' specifically appropriated " ten machines to your contract. When 
he has set them aside, tagged them for you, or performed some 
other unequivocal act of the same nature, then the property (title) 
in them passes to you. A little thought will show this to be a 

183 



§313 CONTRACTS 

useful and necessary rule. The law books say : " Title to tmas- 
certaincd goods cannot pass by sale, merely." Of this, more may 
be said later. (See also Appendix Note 21 [3].) 

But where the goods sold are part of a larger bulk of uniform 
character, such as grain, oil, or coal, it is generally held that prop- 
erty in an undivided part may be so transferred, without appro- 
priation, or separation of the part sold from the main bulk. This, 
again, is a rule of practical usefulness. 

313. The word ^' appropriation [[ as here used means the 
selecting, setting apart, or actually putting the goods into such a 
situation that the buyer may come and take them. The appro- 
priation may in different cases be performed by either the buyer 
or seller, either of them acting with the assent of the other. Con- 
troversies arise only where the selection is to be made by the 
seller. Where the buyer is to make the selection, the appropriation 
takes place when he declares his choice. But if the selection rests 
with the vendor, it may prove difficult to tell at what particular 
moment the appropriation has vested the title of the commodity 
in the buyer, as it is the owner who must bear the loss in case of 
destruction, whether he be vendor or vendee. Suppose you are 
a railroad contractor and order, say, a dozen tents from a dealer's 
stock, and it is his duty to appropriate the same ; it may be hard 
to determine at what precise point you are no longer at liberty 
to change your mind. An enormous number and variety of cases 
have arisen in about this same way, and examples will doubtless 
occur to the student's mind. 

314. As before indicated, the parties may by contract, specify 
at what instant or by what acts title shall be complete. Litigation 
has arisen because they did not so specify, and this has led to the 
development of the common law rules just discussed. As to 
articles manufactured to order, completion of them according to the 
contract followed by delivery, or tender of deUvery, is such an 
appropriation as will pass title. This seems just, also. And it is 
settled that delivery by the seller to a carrier in the manner directed 
by the buyer is a sufficient appropriation (but see § 315), and 
should loss occur it falls on the buyer. 

315. DELIVERY TO A CARRIER, and JUS DISPONENDL 
— Where, by agreement, the title is to pass upon delivery to a 
carrier as just noted (§ 314), the seller can still maintain his grasp 
on the goods until he is assured of payment by the buyer, not- 

184 



CONTRACTS OF SALE AND TRANSPORTATION §318 

withstanding they have passed out of his possession, and have 
apparently been specifically appropriated. The seller may do this 
by acts manifesting his intention, such as making out the bill of 
lading for the consignment in his own name, — i.e. instead of 
billing them to the purchaser at their destination, he consigns 
them to himself or to his agents at that place. Thus the title 
remains in him in spite of his delivery to the railroad. When a 
seller makes a delivery to a carrier in this manner, he is said to have 
reserved the jus disponendi (the right of disposing of a thing) . 

316. Reserving the jus disponendi does, in fact, vary the terms 
of the contract of sale between the parties, which, it would appear, 
the seller should strictly carry out. (See Appendix Note 21 [6].) 
But this rule has grown up in favor of the manufacturer or seller 
to protect him when dealing with unscrupulous or financially 
irresponsible persons. Thus the right is a very valuable one for 
the manufacturing and selling classes, protection of whose interests 
means protection to the whole commercial community. It will 
be seen also that this is substantially the status of a C. O. D. trans- 
action, which is generally upon a smaller scale, merely. But the 
carrier may withhold possession of the property from the buyer 
until payment of the purchase price (^' seller's lien "), and for this 
the buyer has no redress, in a suit for possession of the goods. 

317. STOPPAGE IN TRANSITU. — There is another right 
which has grown up to protect the seller, similar in its effect to 
reserving the jus disponendi (§ 315) though accomplished in a 
different fashion. It is called the '' right of stoppage in transitu, '\ 
and is that right which an unpaid vendor has, when selling goods 
on credit, to resume possession of them while they are in course of 
transit, and before they have reached the buyer, — the right to 
be exercised only in case the buyer has become insolvent or bank- 
rupt, which fact comes to the seller's knowledge after he has 
shipped the goods. 

This is a valuable right, since, if it is not exercised in such a case, the 
goods go into the general assets of the insolvent buyer to the enrichment of 
his other creditors. The seller, becoming thereby a creditor himself, is only 
eligible to receive the same proportion of his claim as any other creditor, so 
that the net proceeds of his sale may, perhaps, be only 30 cents on the dollar. 

318. How Exercised. — The seller exercises the right of stop- 
page by taking possession of the goods himself, or by an agent, or 
by giving seasonable notice of his claim to the carrier ; or to some 
other person who is in actual possession of the goods, such as the 

185 



§319 CONTEACTS 

master of a ship, or a freight agent. The order of interception 
must be expressed in clear and unequivocal terms. When so 
expressed, the carrier has no discretion in the matter, but must 
obey the order of the seller. If any mistakes are made, giving 
rise to claims for damages, the seller is answerable for them. But 
if in spite of the seller's orders, the carrier proceeds to deliver the 
goods, the seller's rights are not affected. 

A, in Cleveland, ships goods to B in Philadelphia. After their arrival 
there, A notifies the railroad not to deliver them to B. Would the carrier 
be liable in case he made delivery? It is held that he would be liable. But 
if there had been an agreement between carrier and consignee whereby carrier 
was to hold possession as consignee's agent, then the carrier would not be 
liable for delivering, since the transit would have ceased. 

Again suppose A, who is the seller, consigns goods to B and sends him 
the bill of lading. B indorses the bill to C, to secure an advance of money 
made by C to him, and then B becomes insolvent. Can A stop the goods 
in transitu? In such cases it is held that the seller's right to be paid should 
be protected in so far as the interests of a bona fide indorsee (as C was in this 
case) are not prejudiced thereby. Thus, it is held that A's right extends 
only so far as to entitle him to what may remain of the proceeds, after C has 
been satisfied for his advance. 

319. Duration of Right. — When we consider the numerous 
ways and stages by which merchandise is transmitted about the 
country, it appears that a question arising in a variety of ways 
is: How long does this right of stoppage in transitu continue? 
The rule is that the right continues from the time the goods are 
delivered to a carrier by land or water, for the purpose of trans- 
mission to the buyer, until the time when : — 

(1) the buyer, or his agent, takes delivery of the goods from 
the carrier, either before or after their arrival at the appointed 
destination ; or 

(2) after the goods have arrived at their destination, the 
carrier notifies the buyer that he is holding them as buyer's bailee ; 
or 

(3) the carrier wrongfully refuses to deliver the goods to the 
buyer, or 

(4) the seller waives his right of stoppage. 

320. A complicated set of facts may arise when it will be difficult to 
say whether the right of stoppage in transitu was exercised too late, or not. 
As one authority put it: " Goods are deemed to be in transitu not only while 
they remain in possession of the carrier, whether by land or water, though 
the carrier is designated by the buyer, but also when they are in any place 
of deposit connected with the transmission and delivery of them, and until 
they arrive into the actual or constructive possession of the consignee." 

This apparently plain rule is subject to a variation when there is an 
interruption of the transit, such as delivery of the goods by the original 
carrier to a warehouseman, or other agent of the buyer, preparatory to for- 

186 



CONTRACTS OF SALE AND TRANSPORTATION §322 

warding them through a connecting carrier, — in which case the seller's right 
is defeated. Whether or not it is defeated will depend upon the intention 
with which the goods were delivered to this intermediate person; if he took 
them simply as a forwarder so that the transit could be properly said to be a 
continuous one, then the right is not defeated; but if he took them as the 
agent of the buyer, so that from that moment the buyer was in constructive 
possession, then the right of stoppage subsequently exercised is ineffectual. 

321. Efifect of Stoppage. — It is interesting to note that if the 
right of stoppage is exercised the contract of sale is not thereby 
rescinded, but the seller's lien (§ 322) is at that moment revived. 
The result is that even if the seller has received part payment for 
the goods, and has exercised his right of stoppage, yet he does not 
have to refund the part paid. Instead, it is his privilege to resell 
the goods. Should any surplus remain, he must turn it over to 
the first buyer, to whom he may also look, should the sale result in 
a deficit. 

As already indicated (§ 319) this right of stoppage may be 
defeated by the carrier's making delivery to the buyer when the 
goods have reached their destination; it will also be defeated by 
the insolvent buyer's indorsing the bill of lading to an innocent 
and bona fide purchaser, this being one of those rare cases where a 
person can transmit a better title than he himself possesses. 

322. SELLER'S LIEN is another means of assuring a seller of 
payment for goods. Though title has passed to the buyer, and the 
goods remain in the seller's possession, he is not obliged to sur- 
render custody until paid ; he is said to have a lien upon the goods 
for the purchase price. He is especially justified in refusing to 
deliver if he hears of the insolvency of the buyer before receiving 
payment. If the price in full is paid or tendered, the seller is 
divested of his lien. 

An essential point to be noticed here is that lien always relates 
to possession. Hence if the seller parts with the possession he 
waives his lien unless it is expressly agreed otherwise. In general, 
a lien is waived by the vendor when he sells goods on credit, or 
if he takes a bill of exchange or other negotiable instrument in 
conditional payment. If a lien has been waived, it may later be 
revived, if the seller remains in possession until the expiration of 
the term of credit given ; or when the negotiable instrument given 
in payment has been dishonored ; or when the buyer becomes in- 
solvent, even though the term of credit has not expired, nor the 
note been dishonored. It is held, furthermore, that delivery of a 
part of the goods will not destroy the lien unless made under such 

187 



§ 323 CONTRACTS 

circumstances as to show an intention to do so. But in any 
event, the seller will lose his lien when he unconditionally delivers 
the goods to the buyer. 

323. Other Remedies of Unpaid Seller. — When the property 
has not passed and the buyer refuses to accept and pay for the 
goods when offered, the seller's only remedy is an action of damages 
for non-performance of the contract of sale, — i.e. non-acceptance. 
His loss is in the failure to dispose of the goods, but since they 
remain in his possession, his damages may not be great, and he 
may, of course, resell to some one else. 

If the goods are already in the possession of the buyer, though 
title has not passed, the seller may have an action of replevin to 
regain possession of them, or a tort action of conversion!, where the 
damages will be the value of the goods at the time the seller re- 
linquished possession of them. In the case of the buyer's refusal 
to accept the goods, no special tender of them is necessary, though 
the plaintiff must prove that he was ready and willing to perform 
his part of the contract. But a mere notice that the seller is ready 
to deliver is not regarded as sufficient proof of the tender. 

The general rule in the United States is that upon refusal of the buyer 
to accept, the seller may sue for the whole purchase price, notwithstanding 
the seller retains possession of the goods. In the alternate case where the 
title has passed, the buyer's refusal to pa}^ after having been put in possession, 
does not enable the seller to rescind the contract. We have already discussed 
the remedies which may be had against the goods; but in this case his only 
recourse is a personal action for the price against the buyer. 

324. REMEDIES of the BUYER. — So far we have been 
discussing the rights and remedies of the seller. Obviously there 
must be another equally important class of persons ; namely, 
buyers. Perhaps the most common case to give trouble is where 
the seller fails to dehver the goods when the terms of the contract 
entitle the buyer to possession. 

The breach is on the part of the seller, as he fails to transfer 
the title or deliver the goods, but the purchaser's only right is an 
action of damages for failure to deliver. If the title has passed, 
the buyer may either sue for damages for non-delivery, or maintain 
a tort action called trover, and secure damages for being deprived 
of possession of the goods. 

Suppose the contract is for goods upon future' delivery, and before that 
date, the price having risen, the seller wishes to back out of the bargain. 
In this case the buyer can recover as damages the dilTerence between the 
contract price and the higher market price. This will put him substantially 
where he was in the first place, since with the amount he agreed to pay the 

188 



CONTRACTS OF SALE AND TRANSPORTATION §328 

seller plus the amount he recovers as damages he can then go into the market 
and supply himself as well as he could have done in the first place. 

325. If no time was fixed for delivery, the buyer should de- 
mand the goods before bringing suit ; as otherwise his trouble may 
be wasted by the seller's subsequent offer to deliver. Having 
demanded the goods the buyer has a tort action for conversion (or 
trover) of goods rightfully belonging to him, in addition to the fore- 
going damages for non-delivery. 

326. ILLEGALITY and FRAUD. — When a sale is tainted 
with illegality it is void. Many sales are made illegal by statute, 
as sales of liquor without a license, of merchandise on Sunday, etc. 
Other are illegal at common law, as sales of articles for the further- 
ance of some purpose contrary to good morals, or in violence of 
public decency, as the selling of obscene books, or instruments 
for committing crime, sales of goods to the public enemy, sales of 
pubhc offices, sales of law suits, of lottery tickets, etc. These will 
infrequently concern the engineer, so the principal discussion wiU 
relate to sales void for fraud, a highly important element which 
may enter into almost any business transaction. 

327. Remedies of Defrauded Party. — When a person has been 
induced to enter a contract by the fraud of the other party, he 
has various options: — 

(a) of affirming the contract, and suing in a tort action of 
deceit ; or 

(b) If he is sued for the price, he may set up the fraud in re- 
duction of the same, as e.g. showing that the thing was misrepre- 
sented to him and therefore not worth the agreed price ; or 

. (c) he may rescind the contract within a reasonable time after 
discovery of the fraud, unless in the meantime the rights of other 
persons have intervened, and set up this rescission when sued for 
the price. 

If the buyer is defrauded, he may recover the price, if it has 
been paid ; and if it is the seller, and he has delivered the goods, 
he may maintain an appropriate action for their possession. 

328. Fraud may be practised upon the buyer, or upon the 
seller, or by both conjointly to execute a fraud upon creditors. 
Each will be treated briefly. As to the BUYER, the rule caveat 
emptor (let the buyer beware) is applied. It means that before 
making a purchase it is the buyer's duty to assure himself that 
the goods are what they are represented to be. He must have his 

189 



§329 CONTRACTS 

eyes open and cannot wait for the seller to point out defects in the 
article. If the seller does not point them out yet the buyer cannot 
necessarily claim afterwards that he has been deceived. If dis- 
satisfied, or suspicious, he may demand a warranty. 

If both parties are ignorant of a defect, and in fact no deceit is practised 
on the buyer, it has been held that caveat emptor apphes equally well. In 
Massachusetts it is held, however, that where the defect could have been 
discovered upon a careful examination by the purchaser, he has no redress 
if he discovers it subsequently, unless the seller is manufacturer of the goods. 
This principle is embodied in the doctrine covering " latent defects," upon 
which there are numberless cases. 

329. Technical Elements of Fraud. — In an action for fraud 
or deceit, it should be remembered that there are five points or 
technical '' elements " which must be proved in order to maintain 
the case. They are : — 

(1) The defendent must have made a false representation of 
material facts ; 

(2) with knowledge of its falsity ; 

(3) with intent that it should be acted upon. 

(4) It must have been believed to be true by the plaintiff ; and 

(5) have been acted upon by him to his damage. 

Thus, it is not every mean imposition or petty swindle in 
business dealings which will be righted by a court of law. It is 
often extremely difficult to offer legal proof (proof according to the 
established rules of evidence), of all the five elements required. 
While all shades of fraud are commonly practised, the line is drawn 
as indicated. Observance of these rules may work hardship in 
individual cases, but they are wholesome rules in the long run 
since trifling disputes are thus kept out of court. 

It is an established principle that if the seller makes an active 
effort to deceive, or conceals something which the buyer was 
entitled to know, this enables the buyer to avoid the contract. In 
Massachusetts it is necessary to show the guilty intention, for if 
the seller acted in good faith, the sale will not be avoided. This 
does not mean, however, that pure falsehoods, or reckless and 
careless statements of beliefs made as though they were facts 
within the vendor's knowledge (when he did not know), can be 
excused on the basis of an honest intention. 

330. Representation and Warranty Distinguished. — It should 
be observed, in passing, that there is a clear distinction in degree 
between a representation and a warranty. A representation is any 
act or statement faUing short of a warranty, but which would con- 

190 



CONTRACTS OF SALE AND TRANSPORTATION §332 

vey to a man of ordinary intelligence a clear impression of fact 
sufficient to govern his conduct. A warranty is essentially and 
always a part of the contract, while a representation is at best but 
an inducement to enter upon a contract. This matter shades off 
still further into what is known as ^' dealer's talk/' meaning that 
mere general commendation of the article by the seller does not 
amount to a representation unless it is a positive statement as to 
what a thing cost, what has been offered for it, what it has sold f or^ 
etc. 

331. Fraud on Vendor usually arises when the buyer has mis- 
represented his financial standing, and when he knows that he is 
actually or practically insolvent at the time he makes the purchase. 
Here the seller can usually avoid the sale for fraud. But the line 
seems to be drawn between this point and the situation where the 
buyer knows that very likely he will be unable to pay, yet has no 
positive intention of not paying, and does not by positive acts or 
statements tending to hide his financial condition represent that 
he is responsible. It is held that these latter circumstances will 
not of themselves avoid the sale. Very close questions might thus 
arise, for it is certain that with knowledge of these facts the seller 
would not have parted with his property. 

Evidence of Fraud. — It should also be noticed that what the 
intention of the buyer was in a given transaction may be inferred 
from his conduct and circumstances during its consummation. 
This means that as it is extremely difficult, and often impossible 
to tell what really was in a person's mind (or rather, to prove it in 
the accepted legal fashion), extrinsic evidence as to what the 
buyer did or said, or of the attendant circumstances may be intro- 
duced by the testimony of ordinary witnesses. From such testi- 
mony the jury will be allowed to infer that such and such was in 
the buyer's mind and to find that it was so " in fact." It is plain 
that otherwise vast frauds could go unpunished. 

See also second illustration in § 334. 

In a case where a buyer represented that a competitor of the vendor's 
had underbid him, and thus induced a sale at the lower figure, the statement 
proving to be false, the sale was avoided as fraudulent. 

332. Sales to Defraud Creditors. — Sales made with intent on 
the part of buyer and seller to delay, hinder, or defraud creditors 
of the seller are clearly and utterly fraudulent. They may be 
avoided by such creditors, unless another person has in the mean- 

191 



§ 333 CONTRACTS 

time acquired an interest in the thing sold, while acting in good 
faith and purchasing for value. This rule may apply in respect 
to creditors existing at the time of the sale and also to those sub- 
sequently becoming creditors. Thus, in case of the seller's bank- 
ruptcy, sales made within a period of four months preceding the 
date of bankruptcy are voidable for fraud. Whether or not fraud 
exists in a given case is a matter of fact for a jury. 

333. Interesting and comphcated cases arise in this con- 
nection, as for instance where the seller retains possession of the 
goods, which fact is in many jurisdictions a fraud in itself where 
the rights of creditors intervene ; in others it is simply a presump- 
tion of fraud which may be overcome by proof. As a leading 
authority puts it : 

" The object of legislation on this subject was to put an end to frauds 
frequently committed by secret bills of sale whereby persons were enabled 
to keep up the appearance of persons in good circumstances, possessed of 
property, while the holders of such bills of sale had the power of taking posses- 
sion to the exclusion of the rest of the creditors. " It is because of this principle 
that chattel-mortgages are required to be registered in the appropriate public 
place, " with a view to affording creditors and parties interested a true idea 
of the position in life of the ostensible possessor of the goods, " etc. 

334. Absolute good faith plays a leading part in these cases, 
and so does delivery. There must be a fraudulent intention, and if 
creditors seek to set the transaction aside they must show the 
guilty intention on the part of both the parties. 

Thus in Massachusetts it is held that where a person has several creditors 
all of whose claims he can not meet, he may in good faith pay one in full, 
though the rest get nothing. Plainly this is a very critical transaction. 

A sells goods to B by bill of sale, but retains possession of the goods. A 
creditor of A's gets a judgment upon a suit against him, and attaches these 
goods which A is holding. Can B claim goods? Massachusetts and many 
of the States hold that this would constitute a prima facie case of fraud oia 
part of A. 

335. WARRANTY. — A warranty is an undertaking made 
either expressly or impliedly by the seller that certain facts con- 
cerning the article are or will be true. He may say, '' I warrant 
the goods," or this may be imphed from his actions. It is stronger 
than a mere representation, since by it the vendor warrants or 
undertakes absolutely that the article sold possesses certain at- 
tributes. Should the article fail to possess them, the buyer can sue 
for breach of warranty. The action on the warranty will be col- 
lateral (in addition) to the ordinary action on the contract of sale, 
this secondary part of the agreement being a part of the original 
contract by consent of the parties. It should be noticed that the 

192 



CONTRACTS OF SALE AND TRANSPORTATION §338 

warranty is not a necessary part of the contract, and that there 
is no less a sale for want of it. A mere representation, though 
fraudulently made, does not give rise to an action of warranty, but 
may lead to an action for deceit, as already noted. 

336. An express warranty must be given at the time of the sale. 
With regard to quahty, no warranty is imphed from the mere fact 
of sale, since caveat emptor (see § 328) is the general rule. But 
there is an implied warranty of title by the act of selling, whereby 
the seller warrants his ability to sell. A general warranty, as 
that the goods are sound and perfect in every way, does not ex- 
tend to facts known to both parties at the time of sale, or such as 
would have been revealed by the most cursory inspection. But 
if the defect in the article could only have been discovered by the 
exercise of peculiar skill or training, the purchaser may rely upon 
a general warranty, even though he himself possesses that skill. 

There is a difference of opinion among the courts upon this point, some 
holding in effect that one has a legal right to expect others will deal with him 
in good faith, or to assume to a certain extent, at least, that the other man 
will not lie to him. This, of course, robs the rule caveat emptor of some of its 
rigor. 

337. Implied Warranty. — Caveat emptor is considered to 
apply when an article is inspected by the buyer at the time of 
making the purchase, i.e. if there is a warranty it must be an 
express one. When a manufacturer undertakes to fill an order 
for his product he impliedly warrants that the goods furnished 
will be suitable for the purpose for which the buyer designed them. 
To the same effect, a bargain and sale of a thing answering a par- 
ticular description implies a warranty that it does so answer. A 
New York case seems to go still further, saying that such goods 
must be marketable or merchantable and of such quality that they 
could be disposed of, if need be, to persons dealing in such goods. 
Where goods are sold by description, or for a particular use, 
caveat emptor does not apply, since the burden of inspection, to 
see if they are fit, is upon the seller. 

A, who was the proprietor of several ice-houses in New Hampshire, sold 
10 carloads of ice to M, a Boston dealer. A did not expressly warrant the 
quality of the ice, which was to be shipped whenever M's trade called for it. 
Upon arrival, the ice was found to be poor and not salable. A sued for the 
purchase price. Could he win? 

338. SALES by SAMPLE. — In this case it is necessary that 
the parties should have reference to the sam£ sample in order that 
there may be mutuahty in the contract. When one sells by 

193 



§ 339 CONTRACTS 

sample or undertakes to supply goods in accordance with a sample 
submitted by the customer, he tacitly agrees that the bulk of the 
goods shall be equal in quahty to the sample. (Sec. 16 of Sales 
Act adds : There is an implied warranty that the buyer shall have 
a reasonable opportunity of comparing the bulk with the sample, 
unless it is a C. O. D. transaction.) In Massachusetts, when exist- 
ing goods are sold by sample it is only necessary that the article 
supplied in bulk should correspond with the sample, the seller 
not warranting either the sample or the whole against latent 
defects. 

339. DELIVERY. — Unless specified otherwise, the pre- 
sumption is in favor of a cash sale, and that delivering the goods 
and paying the price are concurrent conditions. (See §§ 367-8.) 
Delivery may be of three sorts, actual, constructive (see § 304), and 
" symbolical " where the possession is transferred by passing some 
symbol of the goods, such as the bill of lading. 

When the delivery is of a greater amount of goods than was 
contracted for, or the goods ai'e sent mixed with others, the buyer 
may reject the amount in excess of the contract ; or if he must incur 
trouble and expense in separating them, he may reject the whole 
lot upon the ground that the terms of the contract have not been 
met. If a less quantity is delivered, he may also reiect them as 
before ; or he may accept, when it is generally held that he must pay 
at the contract price for those received. 

When under the contract of sale the seller is authorized or 
required to send the goods to the buyer, delivery to a CARRIER 
for that purpose is prima facie deemed a delivery to the buyer, and 
passes the title, the carrier being deemed to be the agent of the 
buyer. This will be especially true if the buyer has designated 
which carrier is to convey them (where there are several), or where 
some one employed by the buyer (as a teamster) receives them. 

340. Unless it is otherwise agreed, the buyer is entitled to a 
reasonable time and opportunity TO EXAMINE the goods to 
ascertain whether they are in conformity to the contract ; and an 
offer to deliver, accompanied with a refusal to allow such examina- 
tion, is not a good delivery. 

If the contract is silent upon it the vendor is not obliged to 
send the goods to the buyer, but it is enough if he holds himself in 
readiness to deliver them when called for. Under such conditions, 
if nothing more remains to be done by the seller, the title has 

194 



CONTRACTS OF SALE AND TRANSPORTATION §342 

passed, and the goods are at the risk of the buyer (compare with 
§ 301). 

341. PAYMENT may be arranged in three ways: by paying 
cash ; by giving a promissory note, check, or other negotiable instru- 
ment ; and by giving credit. If payment is made by check it is 
conditional upon the buyer having funds in the bank; if he has 
none, then it is only the semblance of a payment. The person 
taking it is bound to present the check in due season at the bank 
(see § 383), and should he fail to do so, and the bank becomes 
insolvent, he is merely a creditor of the bank, but has no right 
against the drawer of the check. 

With reference to the effect of a promissory note taken in payment, 
there is a difference of opinion among the courts. Some hold that it is absolute 
payment, and if not paid when due, suit must be brought on the note, but 
the original contract of sale has been wiped out by it. Others say that this 
is but a conditional payment, and upon the note's being dishonored the seller 
still has his action for the goods, irrespective of the contract in the note. 

When the sale is on credit, the title to the goods vests immedi- 
ately in the buyer, and the seller is obliged to wait for his money 
by mutual agreement. (See § 322 in this connection.) 

CARRIERS 

A subject intimately related to sales is that branch of bail- 
ments (see § 294) which pertains to the duties and liabilities of 
common carriers, and the legal rights of the shipper, since carriage 
of the chattels is a part of almost every mercantile transaction. 
The engineer is bound to be largely interested in the transportation 
of both bulky and heavy articles over great distances, as con- 
tractor's plant, machinery, lumber, coal, cement, stone, and 
structural steel. Hence the following brief treatment. 

342. COMMON CARRIERS and THEIR PRIVILEGES.— A 
common carrier is one who undertakes to carry goods for hire for 
whomsoever may employ him. This embraces draymen, express- 
men, railroad, express, fast freight, and pipe hne companies, on 
land ; and bargemen, ferrymen, and steamboat companies on the 
water. (Steam tow-boats, sleeping-car companies, telegraph, 
telephone, and private bridge companies are not common car- 
riers.) The liabihties of such carriers begin when the goods have 
been dehvered to them or to their proper agents for the purpose of 
immediate transportation, and are accepted by them for that pur- 
pose. But they are not obliged to accept goods of a kind which 

195 



§ 343 CONTRACTS 

they do not profess to carry, nor to undertake to carry by other 
than the ordinary means and route. Neither are they obliged to 
accept goods when their facihties are insufficient to handle them, 
nor in the absence of statute on the matter are they obliged abso- 
lutely to provide such facilities (see below). They are not obliged 
to accept dangerous or suspicious goods ; nor goods unfit for ship- 
ping ; nor goods offered them by one not their owner. They are 
not obliged to carry goods unless tlie transportation charges are 
paid in advance. Acceptance of the goods by the carrier may 
be presumed when they are left in a usual place in accordance 
with the contract or custom of the carrier to so receive them. If 
they are deposited with the carier for jiiUirc transportation, the 
carrier's duties toward the goods will be that of a warehouseman, 
merely, and his liabilities as a carrier will not arise until the con- 
signor has authorized immediate transportation, 

343. FACILITIES. — The rule is that a carrier is bound to 
provide sufficient facihties and means for transportation for all 
freight which it is reasonable to expect will be offered; but he is 
not bound to provide in advance for extraordinary occasions, nor 
for an unusual influx of business, which in the view of an ordinarily 
prudent and diligent business management could not reasonably 
have been expected. , It has been said that the amount of business 
ordinarily done by a railroad company is the only proper measure 
of its obligation to furnish transportation. Hence if the pressure 
of traffic is such as the carrier might have reasonably anticipated 
and provided for, he will not be released from liabihty to receive 
goods on the ground of lack of convenience. In some States 
statutes provide a penalty against any railroad for failure to pro- 
vide cars upon a written apphcation made by the shipper. 

344. DISCRIMINATION. — A Federal Statute prohibits dis- 
crimination in favor of or against any shipper, either in respect to 
charges or facilities. But this leads to a discussion of the Inter- 
state Commerce Act and its allied constitutional entanglements 
which is foreign to our present purpose. To follow the spirit of 
the law, the carrier should ship in the order of precedence in which 
the goods were received, save that he may make an exception in 
the case of perishable goods ; but it is held that he has no right to 
accept perishable goods for prompt shipment when it will interfere 
with the proper shipment of goods already on hand. 

345. CARRIER'S LIABILITY and '' EXCEPTED " RISKS. 

196 



CONTRACTS OF SALE AND TRANSPORTATION §348 

—The carrier is held to be an insurer of the goods against all losses 
save those occasioned by " act of God " ; by the pubhc enemy ; 
by the fault of the shipper ; loss by reason of inherent qualities of 
the thing shipped, as in the case of extra-perishable articles; or if 
the loss is occasioned by the exercise of public authority. 

Loss by " act of God,'' is one occasioned by an irresistible disaster result- 
ing directly from natural causes and in no sense attributable to human agencies, 
such as losses by reason of lightning, tempest, earthquake, flood, and sudden 
death; while loss by fire not caused by lightning, nor spontaneous combustion, 
and loss by collision or explosion would not be so included. Even when loss 
is caused by one of the " excepted " perils, the carrier is liable if such loss 
could have been avoided by the exercise of ordinary care and diligence. 

Under the " Public enemy " is included pirates on the high seas, and 
bodies of men existing in violation of law, including mobs, and bodies of 
strikers and rioters. Losses caused by the Confederate forces in the Civil 
War were all considered as losses due to the public enemy, and the R. R. 
companies in whose possession the goods were when destroyed, were not 
liable. 

346. Where the fault of the shipper causes the loss, plainly 
he cannot sue the carrier for the results of his own negligence. 
The carrier's liability begins at the time the goods are delivered to 
him for transportation and ends when they are delivered to the 
consignee or owner, or when they are deposited in a safe ware- 
house, after there has been a reasonable opportunity for the 
owner or consignee to remove them. 

347. The carrier may by contract hmit his liabihty from that 
of an insurer of the goods to such an extent that he will be bound 
only to ordinary diligence ; but he cannot stipulate against negli- 
gence, fraud, nor misconduct on his own part, nor upon that of his 
servants, such contracts being against pubhc policy. It is common 
and proper for a carrier to set reasonable limits to the sum for 
which he shall be held responsible in case of loss; and he may 
refuse to take goods of greater value than ordinary, unless a higher 
rate be paid, as this would be fraudulent on the sender's part. He 
may also stipulate that he will not be liable for any loss unless a 
claim therefor is presented within a reasonable time. 

348. DELIVERY by CARRIER. — The general rule is that 
carriers are bound to make personal delivery to the consignee, and 
their liability continues until such time as they have done so. 
The necessities of modern business allow this delivery to approach 
the constructive (see §§ 339 and 304) type. Hence if a carrier 
by water delivers the goods upon a designated or customary wharf 
and gives notice to the buyer, it is generally held to be enough to 
reheve the carrier from further liabihty. As to railroads, there is 

197 



§ 349 CONTRACTS 

a difference in local customs, some holding that the liability ceases 
when the goods are safely removed from the cars and placed in 
storage ; others hold that in addition to this, notice must be given 
to the owner and a reasonable time must have elapsed for their 
removal before the carrier's hability terminates. Express com- 
panies, and teamsters generally, are usually bound to make per- 
sonal delivery to the consignee, and failing to dehver to the right 
person, the carrier becomes liable for loss or damage resulting 
from such wrongful dehvery. 

349. The carrier will be excused from delivery to the consignee 
when the goods are demanded by one having a paramount title ; 
or where the consignor has stopped them in transitu (see § 317) ; 
or where the carrier has lost them through an " excepted peril." 
(§ 345.) 

If a BILL of LADING has been issued, delivery must be made 
to the holder of it, or to his assignee; if the carrier delivers to a 
person other than the holder of such bill, he will be liable for 
wrongful delivery, even though he delivers to the consignee 
named. This will be especially true if the shipper has expressly 
directed the carrier to dehver only to the holder of such bill and 
the carrier does deliver without requiring its production. It will 
be seen that this rule prevents great frauds, since not a little 
business is done upon negotiable bills of lading. The instrument 
passes freely from hand to hand, and delivery of it is held to be 
symbolical delivery of the goods. 

350. CONNECTING CARRIERS. — The duties which have 
been mentioned as binding upon railroad companies also extend 
to goods properly tendered them by connecting lines. One carrier 
whose line connects with another cannot refuse to deliver to, or 
to receive goods offered by such line, or cars of that line carrying 
freight, according to the proper and usual course of business. 
When goods are to be sent over several connecting lines, the line 
upon which loss occurs is held to be liable for it, and the receiving 
carrier as such cannot be sued for the loss. If the first carrier 
finds the second unable to take the goods on account of a press 
of business, and they are lost or destroyed while awaiting transit, 
the first carrier must bear the loss. This is because so far as the 
shipper is concerned, the goods are all the time in transit. In 
America the receiving company is held to be the agent for the 
other companies, while in England it is just the opposite. 

198 



CONTRACTS OF SALE AND TflANSPORTATION §353 

351. CARRIER'S LIEN is the right possessed by the carrier 
by which he may refuse to dehver goods unless his charges are 
paid. Upon refusal of payment he has the right to sell the goods 
for the charges, pay himself from the receipts, and turn the balance 
over to whoever seems entitled to it. As appeared under " Lien '' 
in a former discussion (see § 322), of course he loses his lien when 
he parts with the custody of the goods. It is generally held that 
he has a lien for his freight and storage charges on those particular 
goods, and that this covers all proper charges throughout the 
whole of a continuous transit over successive lines. 

This lien does not extend to charges arising under some con- 
tract other than that relating to the specific goods. That is, it is 
not a " general lien " — running against any and all of the goods 
that are or may come into the possession of the carrier, — for out- 
standing charges against that shipper. And it is held that the 
lien does not attach as against the true owner when the goods were 
delivered for transportation by a wrongdoer. It is plain that if 
it were otherwise, much injustice might be done. 

A railroad cannot have a lien for demurrage charges, or for the 
inconvenience and expense which it may suffer by reason of the 
consignee's not having unloaded the goods from the cars within a 
reasonable time. A carrier by water may have a lien for salvage 
and for incidental expenses ; and also for customs duties advanced 
upon imported goods. 

352. In Massachusetts it is held that a carrier's lien is superior 
to a vendor's right of stoppage in transitu. The consignor, being 
the vendor of the goods, must pay the freight in order to secure his 
right of stopping the goods, but this superiority of lien exists only 
with reference to the particular goods whose carriage is in pro- 
gress, as already noted. Also, in that Commonwealth, it is held 
that the carrier may hold the consignor for freight, even though 
he knows the goods have been sold to the consignee; but the con- 
signee is bound to pay the freight, unless it is otherwise agreed. 
It is also true that goods once dehvered to a (common) carrier can- 
not be taken away, either by shipper or consignee, without paying 
freight and other reasonable charges. 

353. CONCLUSION. — The student will observe that the 
highly interesting and practical matter of carrying persons has not 
been touched upon. Texts which may assist the student or en- 
gineer to pursue this and the foregoing matters further, are Hutch- 
inson on Carriers ; and Schouler on Bailments. Browne and Story 
are other authorities on the same subject. 

199 






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200 



QUESTIONS 

Questions on Chapter VII 
SALES and CARRIERS 

1. Give a technical definition of a sale. 

2. Distinguish " sale " from " bailment "; from " consign- 
ment.'' 

3. Explain the difference between executed and executory sales. 

4. What is the Sales Act? Of what importance to us? 

5. What elements and formalities are required in sales? 

6. Suppose you buy stolen goods. Who now owns them? 

7. When may a non-owner pass a good title ? 

8. What is the rule as to sale of goods not in existence? 

9. What was the origin of the Statute of Frauds? Its present 
importance? 

10. What is the point of the seventeenth section? Discuss the 
Statute as a rule of evidence. 

11. State the distinction drawn between a sale and a contract 
for work, labor, and materials. 

12. Narrate concisely the carriage case. What is the point? 

13. What is the relation of the Statute to an order given a manu- 
facturer? 

14' What was the difference between a common law sale and 
one made after the Statute was enacted? 

16. State Rule (J.) under the Stattite. Discuss circumstances 
where it becomes important. 

17. What kinds of delivery are there? Explain briefly. 

18. Illustrate one case of '' constructive " delivery. 

19. Recite upon " binding the bargain.'' 

20. What are the requirements for the '^ memorandum *'f 

21. What is the effect on a sale of non-compliance with the 
Statute of Frauds? 

22. When does title pass? What is the test? 

23. Name some important conditions precedent to passage of 
title. 

24. Under what circumstances does title pass instantly and 
in the present? 

25. Recite upon the case where something remains to be done. 

26. Distinguish between the two sorts of conditional sales treated 
in the text. 

27. Recite on passage of title in sales on approval. 

201 



CONTRACTS 

28. '' Specific appropriation,^^ — what is meant? When im- 
portant? 

29. What about title to " unascertained " goods? 

30. Recite upon " appropriation.^^ Who makes it? 

31. What has appropriation to do with loss of the goods? 

32. Why have the foregoing rules about passing title been neces- 
sary? 

33. When goods are manufactured to order when does title pass? 

34. What relation does delivery to a carrier have to title passing? 

35. Explain carefully " jus disponendi.'' For whose benefit is 
the doctrine evoked? 

36. Does reserving the '' jus dispondendi " vary the contract? If 
so, how? Why permitted? 

37. What is meant by "■ seller's lien "f 

38. Explain stoppage '' in transitu. '^ Who does it? When? 

39. What is the practical advantage of the right of stoppage? 
Whom does it benefit? 

Jf-O. How is right of stoppage exercised? 

41. Suppose the carrier delivers in spite of orders to stop in 
transit, — does the seller lose? Suppose he delivers before getting 
word from seller? 

42. Name two ways, or circumstances, whereby the goods are 
said to be at the end of their transit. 

43. Suppose goods have been removed from cars and stored in 
freight depot, but buyer has not been notified of their arrival. Are 
they still in transit? 

44' Suppose you ship goods over the X. R. R. via M. & N. 
R. R. The latter received the goods from you, and has delivered 
same to X. as its connecting carrier. Are the goods still in transit? 

45. What effect does the stoppage in transit have upon the con- 
tract of sale? Right endures how long? 

46. Suppose a seller has received part payment, and has also 
exercised right of stoppage. Has he any further privileges? 

47. How may right of stoppage be defeated? 

48. Explain what is meant by " seller's lien.'' What is its 
essential feature? 

49. When is the seller's lien said to be waived? How is it lost? 
60. Can the seller's lien be revived? If so, how? 

51. When the buyer refuses to accept the goods, what can the 
seller do about it? 

202 



\ 



QUESTIONS 

52. If a buyer has been put in possession of the goods but refuses 
to pay for them, what can be done about that? 

53. In case one has bought for future delivery on a rising market, 
and cannot secure delivery of goods when due, what is the remedy? 

54. In case just put who really owns the goods, i.e. has title 
passed or not? 

55. Name at least three kinds of sales void for illegality. 

56. What rights has the party defrauded in a contract of sale? 
Give an illustration with assumed facts. 

57. Will it make any difference if fraud was on buyer or seller? 
If so, what? 

58. Explain the rule " caveat emptor. ^^ Why is it necessary? 

59. If a person is suspicious of the quality of goods, what should 
he do? 

60. What is the rule as to " caveat emptor '' and latent defects 
in Massachusetts? 

61. Name the technical elements of fraud. Why do these rules 
exist? 

62. What is the bearing of honest intentions upon the question 
of fraud in Massachtisetts? 

63. Distinguish between a representation and a warranty. 

64. How does fraud on the vendor most commonly arise? What 
facts will need consideration to prove this fraud? 

65. How is fraudulent intent proved? 

66. Explain " Sales to defraud creditors.'^ 

67. Suppose a seller retains possession of the goods, what is the 
inference? 

68. What can be said about '^ preference '* among the creditors? 

69. Does a breach of warranty break and discharge the contract? 
Explain why, or why not. 

70. Is there any difference, in an ordinary sale, with respect to 
the warranty of quality, and that of title? Explain. 

71. What is the effect of a warranty when the article has obvious 
defects? 

72. What about defects ascertainable only through the exercise 
of peculiar, expert or intimate knowledge of the subject matter? 

73. What is the warranty with reference to an article to be made 
by the seller? 

74- How does '' caveat emptor " affect sales of goods for a specific 
purpose, or sales by description? 

203 



CONTRACTS 

75. What are the undertakings in sales of goods by sample? 

76. What is the general rule as to time of delivery? 

77. Define *' symbolical " and '' constructive " deliveries. When 
necessary? 

78. If upon delivery there is a gross variation in quantity, 
what can buyer do? 

79. In general, how does delivery to carrier affect title? 

80. What are the buyer's rights as to examining the goods before 
accepting? 

81. Must the seller send the goods to buyer? When, or when 
not? 

82. How may payment be mxide? 

83. Explain the status of payment by check. 

84. Is a promissory note payment of a debt for goods sold? 
Explain. 

85. When does the title vest in a credit sale? 

CARRIERS 

86. What is a common carrier? Enumerate the kinds. 

87. When do the liabilities of a carrier begin? 

88. What are carrier's duties as to accepting goods offered him? 

89. What is the carrier's duty as to providing facilities? How 
is his obligation in this respect measured? 

90. What is the rule as to discrimination between shippers? 

91. Explain the extent of the carrier's liability. State the 
exceptions. 

92. When does fault of the shipper relieve the carrier? 

93. When does the carrier's liability cease? 

94. What is the rule for contact stipulations as to carrier's own 
negligence. 

96. How may delivery by carrier be made? Is the rule different 
as to different carriers? Explain. 

96. When will the carriers be excused from delivering? 

97. What is the rule as to delivery when a negotiable bill of 
lading has been issued? 

98. What are a connecting carrier's duties? What if loss occurs? 

99. What is meant by '' carrier's lien "? What does it cover? 

100. What is the relation of right of stoppage to carrier's lien 
in Massachusetts? 



204 



Chapter VIII 
NEGOTIABLE PAPER 

Competent observers say that at least four-fifths of the interchange of money 
values is accomplished by means other than manual transmission of the 
coin. Business is to-day largely carried on through instruments of credit. 
Are further arguments needed to show that understanding this branch 
of contracts will be valuable to the engineer or business man? 

In this chapter the necessity for rigid rules regulating negotiability will 
be shown. We shall learn who can make negotiable instruments, what 
the responsibilities are of one who signs a note, either as principal or 
agent, and how that signing should be done. What part does a bona 
fide delivery of the instrument play with reference to its validity? What 
is the effect of fraud? What is the status of the parties to accommoda- 
tion paper? And what are the peculiar liabilities of the various kinds 
of indorsers? The characteristics of the ubiquitous bank-check, and of 
other commercial paper, such as certified checks, bonds, judgment notes, 
bills of lading, etc., will be briefly alluded to. 

354. The law of Negotiable Instruments is a branch of con- 
tracts which involves stating many technical rules that every- 
where govern business transactions. We have already hinted at 
certain of its important elements in referring to credit transactions 
under the subject of Sales. The present treatment deals with the 
medium of payment when it is not a cash sale, and outlines a few 
of the most important rights and interrelations among the parties 
according to the rules of the " law merchant.'! The '' law mer- 
chant " (i.e. mercantile law) is that body of commercial usages and 
rules recognized by civilized nations as regulating the rights of 
persons engaged in trade. Whenever a usage has become general 
enough to be noticed by the courts it is incorporated into judicial 
decisions, and thus becomes a part of the law. 

Our discussion will state a few prominent rules of the " law 
merchant '^ pertaining to promissory notes and checks. Other 
forms of commercial paper will be briefly mentioned. A reason 
for attempting the treatment of so great and important a subject in 
the present brief compass may be found in the language of a great 
English law Lord, who said, " There are in some cases differences 
and peculiarities which by the statute law of each country are 
grafted upon it, and which do not apply in other countries ; but the 
general rules of the law merchant are the same in all countries." 

355. NEGOTIABLE PAPER is the term apphed to that class 

205 



§ 356 CONTRACTS 

of contracts the title to which is transferable by indorse^nent and 
delivery, or by dehvery alone.* The original purpose of such 
paper was to permit responsible merchants to transact business in 
foreign countries without the inconvenience or risk of transporting 
large sums of money. These expedients grew up with reference to 
foreign business alone, but their usefulness and general convenience 
soon led to their incorporation into domestic affairs where the 
benefits were found to be no less. The natural result is that doubt- 
less by far the greater portion of present-day business transactions 
are carried on by instruments of credit. 

Negotiability is that characteristic of commercial paper which 
renders its title transferable by indorsement and delivery, or 
delivery alone, so as to enable the transferee (the one taking it) to 
sue upon it in his own name. 

The element of assignability in a contract differs from that of negotiability 
since in the former notice must be given to the debtor, and the assignee can 
take no better title than the assignor had ; while a bona fide indorsee of negoti- 
able paper has a good title without notice to the debtor, and may even acquire 
a better title than his indorser had. 

Negotiability, therefore, is that property or quality by virtue 
of which an instrument may circulate from hand to hand as 
money. 

356. ESSENTIALS TO NEGOTIABILITY. — Let us now 
consider the particular form in which a contract must be put for 
it to possess negotiability. 

1. It must be in writing, signed by the maker or drawer. 

2. It must contain an unconditional promise or orderj to pay 
a definite sum of money. 

3. It must be payable on demand, or at a fixed or determin- 
able time in the future. 

4. It must be payable to order, or to bearer. 

5. It must indicate the parties to the contract, or contracts, 
with certainty, i.e as principals, or as indorsers. 

6. There must be an actual dehvery. 

Upon each of these rules or elements the law books contain 
multitudinous cases. They exhibit complicated sets of circum- 
stances wherein the shades of meaning of each word these rules 
contain have been subjected to the keenest scrutiny and its exact 

* The student should refer to the topic " Assignment of Contracts," 
and note that the rights of an assignee of an ordinary contract, and those of 
the indorsee of negotiable paper, are very distinct. 

t If it is a bill of exchange, or draft, 

206 



NEGOTIABLE PAPER §358 

limitations determined. Thus the labors of court and counsel 
have reduced the rules to their lowest terms in which they have 
just been stated. It is beheved that an engineer of average in- 
teUigence will have no trouble in getting the plain intent and pur- 
pose of these rules, — when it comes to an actual hair-sphtting 
question, as to whether or not the rules are met and satisfied, 
then the services of skilled counsel are necessarily the only 
recourse. 

357. The Rules Discussed. — Rule 1. Seems too obvious to 
need further discussion. 

Rule 2. The meaning may be made clearer by saying that an 
order upon A, or a promise made by him to pay out of a particular 
fund in his hands is not unconditional, since the fund may have 
become exhausted, in which case A's liability would not attach. 
The person who holds this promise or order, therefore, cannot be 
certain of his rights, and this element of uncertainty is what de- 
stroys its negotiability. 

Many interesting cases haA^e arisen where a " condition " was more or 
less clearly expressed by the parties on the face of the instrument; many 
others where the condition was an implied one. For example, in a sale of 
goods where a promissory note was given (see Sales § 341), there was a failure 
of consideration, — the goods were worthless or out of existence, etc. Was 
it implied in the note as a " condition " that its validity should depend upon 
the proper fulfillment of the contract of sale? The question is submitted as 
worthy the further study of the student. 

The sum payable must be stated with certainty. If words 
and figures are used, the words will control ; but if the words are 
uncertain or ambiguous, reference may be had to the figures. 
The following facts or circumstances, it should be noted, do not 
make the sum tmcertain; (a) payable " with interest " ; (b) by 
stated installments; {c) by installments, with a provision as to 
default ; {d) with exchange ; {e) with costs of collection. 

358. Rule 3. " Payable on demand '' covers cases where the 
intention of the parties is so expressed ; or the paper says " at 
sight " ; or '' on presentation '' ; and also where no time is ex- 
pressed. A future time is determinable when the paper specifies 
a fixed time after date, or after sight ; or, on or before a fixed or 
determinable future time specified ; or, on or at a fixed period after 
the occurrence of a specified event which is certain to happen, 
though the time of happening is uncertain, e.g. " I promise to pay, 
six months after my death/' etc. But if the instrument is pay- 
able upon a contingency which may or may not happen, it is not 

207 



§ 359 CONTRACTS 

negotiable. (This is not saying that it will not bind the maker, 
however.) 

359. Under Rule 4 the long recognized " words of negotia- 
bility " are ** to order " or " to bearer.'' But it does not follow, 
that these are the only words which can impart this important 
quality to the paper. The intention of the parties enters here, as 
in all other contracts, and so words equivalent to the above are 
sufficient, if from them it can be inferred that the person making 
the instrument intended it to be negotiable. Thus it is held that 
the word holder is synonymous with bearer. 

A note to '' M, or holder " is negotiable ; but if " To the bearer, 
M," the word " bearer " is ineffective. In some States the word 
assigns is as strong as either " order " or '' bearer." 

360. As to Rule 5 there must be some natural or legal person 
named or pointed out in the bill or note to w^hom the money is to 
be paid, and such person must be in being at the time of issuing 
the paper. Thus the common law rule would be that a promise 
to pay ** To A cr B " would not be negotiable by reason of in- 
definiteness in the payee, since neither party would have full 
right to enforce it, but by statute in most States negotiability is 
given to it. An instrument may be drawn to the holder of an 
office for the time being, this fact being the only clue to identity, 
as '' Pay to the order of Cashier," or '' To Secretary of," '' Treas- 
urer," etc. 

361. There is a rather curious but useful deviation from the 
apparent strictness of this rule as to certainty of persons when 
the instrimient is payable to a fictitious or non-existing person, 
and such fact was known to the person making it so payable. If 
the name or word inserted as payee does not purport to be the 
name of a person, is payable '' To Cash," '* Bills Receivable," to 
" Sundries," etc., etc., the paper is treated the same as though it 
bore the name of a fictitious person, and is payable to bearer. 

362. WHO CAN MAKE NEGOTIABLE INSTRUMENTS?— 
The rule is brief and in accordance with contract doctrines. Any 
person who can contract generally can make negotiable paper. 
The ordinary rules as to competency to contract are stretched a 
little here, in that infants, persons non compos mentis, and married 
women (at common law) can transfer title by indorsement, though 
they incur no liability as indorsers. (See § 374.) 

A CORPORATION may make simple contracts for the ordi- 

208 



NEGOTIABLE PAPER §364 

nary and legitimate transaction of its business, i.e. in matters not 
ultra vires. Hence it is proper for it to make notes and negotiable 
paper, and sign them by the hand of its proper officer, in which 
case the duties and obligations of the corporation are the same as 
those of any natural person. This is also the exact situation with 
reference to coupons attached to corporation bonds ; they are 
negotiable promissory notes of the corporation. 

An AGENT, likewise, may make and indorse negotiable paper 
if he makes it appear clearly in proper form that it is the act of the 
principal, and that he acts simply as agent. Too much care can- 
not be exercised in this respect, since the technicahties must be 
strictly adhered to, and one may inadvertently incur heavy 
financial obligations through omitting to put the two letters b and 
y in their proper places. The invariable rule is that the signature 
must be in the name of the principal, the agent's name and capacity 
plainly appearing in addition thereto. Thus, signing ''A. B., by 
C. D." relieves C. D. of responsibility. Also, '^ A. B., by his agent, 
C. D.," is good; or ^' C. D., agent for A. B.," is safe. But merely, 
" C. D., Agent," has only the effect of binding C. D. himself, no 
matter whom he thought he was binding. 

363. It may be noticed, in passing, that executors, guardians, 
trustees and other persons in a fiduciary capacity have no power 
to bind the estates which they represent, even though they issue 
such negotiable paper in the interest and behaK of such estate. 
They make themselves personally liable only, even if the instru- 
ment expressly describes their representative capacity. In such 
cases they contract and pay personally but are reimbursed upon 
filing their accounts in the equity court. This is an application of 
the ordinary rules of equity to those in trust relationships, and 
prevents trustees and those charged with the care of estates from 
gambling for their own enrichment upon the security which such 
trusts afford. 

364. SIGNING. — The general rule is that it will be sufficient 
if the name of the maker or drawer appears on a7ty part of the 
instrument in such a way as to exhibit an apparent intent to enter 
into a contract obligation. Signing may be by " mark " or by 
initials, and may be made with pencil, ink, or printed by impress 
of type or rubber stamp. The matter of intent is of great impor- 
tance, since if signed without intent, as through ignorance of the 
character of the instrument, it has been held that this is not a 

209 



§ 365 CONTRACTS 

binding signature, because the mind did not accompany it. This 
is not to be taken to mean, however, that it is ever safe to sign any 
instrument without satisfying one's self as to its general nature. 

365. By Whom. — (1) Where a person signs a bill or note in 
a trade or assumed name, he is liable thereon just as if he had signed 
in his own name. 

An illustrative case would be where a person carried on a business under 
a fictitious name, as The Star Cement Co., etc., the organization being neither 
a partnership nor a corporation. 

(2) Signing the firm name by a member is equivalent to sign- 
ing by all of the persons Hable as partners of that firm, acting 
through him as an agent. This is the common partnership 
doctrine of general agency (see § 277) and will include active, 
dormant, and secret partners, as well as partners by implication. 
Thus, where a retiring partner gives no notice of withdrawal he 
ma}'' become liable upon a paper signed in the firm name subse- 
quent to his retirement. 

The engineer's attention should be called to the fact that the partner's 
power to sign negotiable instruments is much more strongly developed in the 
case of trading than in professional partnerships, — as to which the engineer 
would do well to inform himself. 

It is but a step to the proposition that it is immaterial by what 
hand the signature is made provided there is an authority so to 
sign, either express or implied. 

In a rather extreme case, an instrument payable to C's order was to be 
indorsed by him. His wife had full authority to make such indorsements 
for him. For some reason the wife did not sign, but had her daughter do it. 
The daughter signed C's name in the wife's presence, and by her direction. 
This was held to be a good indorsement by C. 

366. Joint Signing. — Where a note is signed by two or more 
persons, it may be a joint note, or a joint and several note; it will 
be ascertained which from the language of the note. As it is 
quaintly phrased, the intention of the parties '' must be fouQd 
within the four corners of the instrument." If it reads : " We 
promise," it is obviously the joint obhgation of the signers as 
individuals though not as partners, i.e. each is bound to pay half 
only. If it reads : '' I promise to pay," and is signed by two or 
more persons, the note is joint and several (see § 279) ; so also if 
it is " We, or either of us," promise, and stiU more plainly if it is 
" We jointly and severally promise." 

367. Fraud. — When a signature has been induced by fraud 
the instrument is invalid, and of no effect. 

210 



NEGOTIABLE PAPER §368 

A strong case might be where a person writes his autograph on a blank 
paper, which paper comes to the hands of a forger. He writes above it a 
negotiable instrument and then puts it into circulation. The fraud is ap- 
parent, and the signer not bound. Where such a case arises, however, it 
will be necessary for the signer to show that he was not guilty of negligence, 
— for otherwise he may find it hard to dispose of the suit of one who has 
purchased the instrument innocently and for value. 

In a somewhat similar case where a person signed, he had an 
opportunity to satisfy himself as to the exact nature of the docu- 
ment and failed to do so. The instrument later came into the 
hands of an innocent purchaser for value (called also a " holder in 
due course *') and the signer was said to be estopt (prevented or 
precluded) from denying its validity or claiming that he intended 
to sign an entirely different sort of an instrument. This again 
exemplifies the tort doctrine: " Every man is presumed to know 
and anticipate the natural consequences of his acts, and is answer- 
able therefor." 

DATING and Other Terms. — The validity and negotiable 
character of an instrument is not affected by the fact that it is not 
dated, nor that it is antedated, nor postdated, if such antedating 
or postdating is not done for a fraudulent or illegal purpose. But 
since the date usually determines when the instrument is to be 
paid, the lack of it will render the instrument useless as a circulat- 
ing medium. 

Neither will the validity and negotiable character be affected if 
the instrument does not specify the value given, or that any value 
has been given therefor, though the words " value received " are 
usually used to indicate that the instrument is founded upon a 
sufficient consideration. This does not mean, however, that a 
real consideration can be dispensed with any more than in any 
other contract. 

The instrument will be equally effective if it does not specify the 
place where it is drawn, nor the place where it is payable; or if it 
designates a particular kind of money in which payment is to be 
made. The presence of a seal, similarly, will have no effect. 

368. DELIVERY. — No negotiable instrument becomes oper- 
ative until it is delivered, by which is meant the actual transfer of 
possession with intent to transfer the title. As with other chat- 
tels, delivery may be either actual or constructive, the words 
being used in the same sense as previously. (§ 304.) 

A promissory note was fully and perfectly drawn and executed, but was 
left locked in the drawer of the maker from which it was stolen by a thief 
who subsequently negotiated it. The note was bad because never delivered. 

211 



§ 369 CONTRACTS 

369. Escrow. — A very interesting class of cases arises when 
there is a '' dehvery in escrow.'' There is a dehvery to some 
person other than the one entitled ultimately to receive the in- 
strument. This bailee is to hold it until certain events happen, or 
certain conditions are complied with, when the instrument is 
to take immediate effect, even though not yet finally delivered. 
The^test is to ascertain whether the person so holding acts as 
bailee or agent for maker, subject to his control; or whether, in 
delivering it to such person, the maker has passed it beyond his 
control in such a way that the other is acting as bailee for the 
ultimate owner. 

Suppose you send a check or note to a bank, directing them to hold it 
until the title papers to a certain piece of land are presented at the bank, 
when they are to make payment in your behalf. Plainly the bank acts as 
your agent, and as such is subject to your control. 

In other cases, a person has made notes binding his estate, placed them 
in envelopes and handed the same to some one with instructions that it should 
be opened only after the giver's death. Sometimes the qualification is 
added,^" This is yours if I never call for it," etc. Here it has been held that 
the receiver is merely the agent of the giver, keeping custody for him. 

It is a fundamental rule of agency that death of the principal revokes 
the agent's authority. Hence as the holder, by the terms of his agency, 
could not open the envelope to effectuate the delivery until after the death 
of the maker, the death having occurred, the agenc}'^ is destroyed and there 
can be no possible " delivery " in this way. But the line is drawn between 
this situation and the one where the envelope is handed over in such a way 
as to allow the giver no further control over it. Then it is a true delivery 
in escrow, — in a case like the above, the condition precedent to its validity 
is the death of the maker. 

370. MAKER'S LIABILITIES. — The maker's hability upon 
a negotiable instrument is that of principal debtor, and his act in 
signing the paper is a promise to the payee and to all subsequent 
holders of the instrument that he will pay it when due, and accord- 
ing to the terms (or tenor) of the paper at the time of signing. No 
demand need be made upon him to fix his liability, as wiU be need- 
ful in the case of an indorser. His engagement to pay is absolute 
and unconditional. 

Payment. Suppose A makes a note payable to B's order, and B indorses 
it in blank to C, from whom it is stolen. At maturity the thief presents it 
to A who pays. Must he again pay to C? No, if the payment was made 
in good faith, because a note indorsed in blank is payable to bearer, and 
hence payment to the thief was according to the tenor of the instrument. 
Moreover, all danger would have been avoided if B had indorsed in full instead 
of in blank, for then the paper would show its history, and the maker would 
be warned if it did not come from proper custody. 

371. MAKER'S DISCHARGE. — The maker or primary 
debtor is discharged from liability on the instrument : — 

(1) By the holder's physical destruction of the instrument. 

212 



NEGOTIABLE PAPER §373 

(2) By the holder's voluntary cancellation of the instrument. 
(Must be apparent on its face.) 

(3) By the holder's renouncing his rights. If this occurs the 
instrument is discharged, except that if it happens before maturity 
there is no effect as to innocent third persons who purchase it 
before that date. 

(4) By payment in due course, i.e. when due, and according to 
the terms of the instrument. 

(5) By material alterations. This is because the altered 
instrument is not the same as that by which the maker bound 
himself. 

372. DISHONOR. — When the maker refuses or neglects to 
pay at maturity the paper is said to be " dishonored." The holder 
of a note is required to give notice to all indorsers that the note, or 
paper, has not been paid at maturity. Should the holder fail to 
do this, the indorser is by the law merchant released from his con- 
tract. Hence this notice of dishonor should alw^ays be given, 
though there are certain cases when it will be excused. The effect 
of such notice is to apprise the last indorser that the holder looks 
to him for payment. This notice must be given promptly, in 
order that the indorser may have an opportunity to look to those 
who are in turn liable to him, in case he has to pay. 

373. ACCOMMODATION PAPER is a device to supply 
credit. X wishes to raise money and applies to Y for the use of 
his name to support X's credit. For this purpose, Y signs a note 
payable to X's order, or indorses one already in existence, — gen- 
erally without consideration. Y is hable to a subsequent holder, 
even though that holder knew there was no actual business trans- 
action between X and Y. 

Therefore, an accommodation party is one who has signed a 
note as maker or endorser, without recompense, and for the pur- 
pose of lending his name, standing, or credit to some other person. 
He is liable to all parties who subsequently come upon (indorse) 
the paper, saving only the party accommodated, between whom 
and himself there is an implied contract (see § 68) that the accom- 
modator shall be repaid for all loss incurred by him, in case he 
has to pay the instrument. (See Appendix Note 15, Suretyship.) 

But the accommodation party does not become liable unless the paper 
has really been transferred to some one for value, e.g., suppose B signs as 
accommodation for A, who then makes a gift of the paper to C. It is certain 
that C cannot sue B. 

213 



§374 CONTRACTS 

Considering the question of whether or not C can sue A, it is said that a 
valuable consideration is necessary between the immediate parties to a bill 
or note, as much as in a simple contract. The want or failure of such con- 
sideration may always be shown between the immediate parties to the in- 
strument. Thus, if the note was delivered as a gift to B, he could not sue 
A upon it, even though there was a strong moral obligation, or natural love 
and affection prompted A to make the gift. (5 Pick. 391.) 

374. INDORSEMENT is a highly important act accomplished 
by the holder's writing his name upon the back of a negotiable 
instrument for the purpose of transferring his title thereto. One 
not a party to the contract may also indorse, for the purpose of 
strengthening the holders' security. Such an indorser assumes a 
contingent hability for its future payment. (See § 373.) Indorse- 
ment is not complete until the instrument is deUvered. The act 
of indorsement is of two-fold nature, — it consists of two distinct 
contracts. First, the title to the bill or note is transferred ; second- 
ly, the law implies a warrant for the payment of the instrument 
when due, provided it is duly presented to the maker, not paid by 
him, and the indorser is duly notified of the failure. This war- 
rant runs for the benefit of any or all subsequent holders of the 
paper, when they " hold in due course," i.e. have purchased it 
for value, and in ignorance of its defects, — if there are any. 

As in every other contract relation, the intention of the 
parties is of paramount importance. Thus, there are various 
indorsements known to the law merchant. They are used as 
circumstances require, and according to the indorser's intention. 
The different indorsements are named: '' In blank"; "In full/! 
or " special " ; " without recourse " ; '' conditional " ; and " re- 
strictive." A brief statement of the effect of each will be given. 

375. The Indorsements. — Indorsement in blank consists 
simply in writing the name of the owner, or holder (by him), across 
the back of the paper ; its effect is to make the paper payable to 
the bearer, whoever he may be. 

In full, or special indorsement, is where the indorser WTites 
" Pay to X or order " over his signature. By it title passes to the 
person named as indorsee who can only transfer title by another 
indorsement. " Withotit recourse " passes title to the instrument 
but is used expressly to avoid one of the secondary effects, viz.: 
the warranty that the instrument is good, or that the indorser will 
make it good, in default by the principal or others bound upon it. 
It is accomplished by using the words '[ Without Recourse " or 
their equivalent over the indorser's name. The same thing is also 

214 



NEGOTIABLE PAPER §377 

called a qualified indorsement, and is used when for any reason 
the holder does not wish to be further bound in the matter. A 
conditional indorsement is probably but little used ; by it possession 
passes, but not title until the happening of some condition named 
as '' Pay A. D. or order unless before payment I give you notice 
otherwise." A restrictive indorsement is very common, as where 
paper is indorsed to an agent '' For collection," or '' For deposit." 
The effect is to give custody, but not ownership. Suppose X, 
doing business in New York, gives you a note payable at the 
Knickerbocker Trust Co. in that city. You deposit it with the 
Shawmut Bank in Boston, for collection. The Shawmut does 
not own the note, but is your agent for collection. 

An indorsement must be of the entire instrument. If it pur- 
ports to transfer only a part of the amount payable, it does not 
operate as a negotiation. If the name of the payee is misspelled, 
he may indorse the paper in the same form, adding if he thinks 
fit, his own proper signature. 

376. INDORSEE'S WARRANTIES. — The customs of the 
law merchant have made the obligations of an indorser so num- 
erous and important that they should be stated here. It is held 
that he warrants to his indorsee and to all subsequent holders, 
and cannot deny the following facts : — 

(1) That the paper will be paid when due ; 

(2) That it is in every respect genuine, and is neither forged, 
fictitious, nor altered ; 

(3) That it is a vahd obligation, and that the contracts be- 
tween all prior parties are valid ; 

(4) That the prior parties were competent to bind themselves ; 

(5) That he as indorser has a lawful title to the bill or note, 
and also the right to transfer it. All but the first of these apply 
to an indorser without recourse; otherwise all apply to every 
indorser. 

377. INDORSER'S DISCHARGE. —A pei-son secondarily 
liable, as the indorser of a note, may be released or discharged in 
any of the following ways : — 

(1) By discharge given to any prior party by the holder. This 
is because every one may indorse on the strength of the prior in- 
dorsements, — hence if one of them is discharged, the chain is 
broken. 

(2) By a binding agreement between the holder and a prior 

215 



§ 378 CONTRACTS 

holder that he should not be sued for a definite time. This seri- 
ously impairs the rights of all indorsers subsequent to the one so 
reheved, and hence discharges their obligations. 

(3) By the holder's voluntary cancellation of the indorser's 
name. 

(4) By a material alteration. This avoids the instrument as 
to all parties who were bound upon it at the time of the alteration, 
because it makes a change in their contract to which they have 
not assented. 

(5) By payment by any other indorser at or after maturity. 
This discharges all others who indorsed subsequently to him. 

378. Purpose of Rules. — A negotiable instrument's stages 
of progress from hand to hand may be likened to the forging of a 
chain of credits, link by hnk. The foregoing rigorous rules have 
been found to be necessary for preserving integrity and good 
faith in business dealings. A little thought will show that the 
only way in which these rules can be followed and made effective 
is that every man must, before accepting any instrument of credit, 
scrutinize it and him who transfers it so closely that negligence 
cannot be imputed to him. This he must do in the light of the 
transferor's credit and business standing. He must also give 
due weight to all the facts w^hich have come to his knowledge or 
bear upon the transaction, since the doctrine of " notice " plays 
a most conspicuous part in these rules. In practice each individual 
generally looks no farther back than his indorser; taking the 
analogy of the chain, he only examines the link next his. But 
as that link has been made under the same close scrutiny of the 
link preceding it, and so on, back to the maker, the strength of 
the chain of credit is thus assured, and the negotiable instrument 
has fully served the purpose of commerce. To allow this, and to 
insure this, the rules are strict and uncompromising. 

379. PRESENTMENT of a bill or note is necessary in order 
to hold the indorsers, because at maturity demanding payment 
of the maker is a condition precedent to the indorsers' liabihty. 

What is a sufficient presentation to effectually bind such in- 
dorsers depends somewhat upon the particular facts of the case. 
It is held that : — 

(1) It must be made by the holder, or one duly authorized by 
him ; 

(2) To the maker of a note, or his authorized agent, such as a 

216 



NEGOTIABLE PAPER §382 

clerk, if made at the place of business ; or the wife, if it is to be 
presented at the maker's residence. 

(3) It must be made on the exact date of maturity, unless there 
is a legal excuse for not doing so ; and 

(4) At a proper place, i.e. at a particular place if one is named, 
otherwise at the home or place of business of the maker ; and 

(5) At a reasonable hour, i.e. the usual banking or business 
hours. 

380. A JUDGMENT NOTE is in form an ordinary note to 
which is added: — 

(1) A power of attorney (see § 134) for the holder, or any at- 
torney, to confess judgment against the maker at maturity ; 

(2) A waiver of the benefit of homestead exemption from at- 
tachment, etc. ; 

(3) An agreement to pay attorney's fees for such confession. 

381. Theory and Benefits. — A judgment note gives the holder great 
advantage over an ordinary promissory note, especially when time is an 
important element in collection. The purpose of all legal procedure in serving 
the writ on a defendant, summoning him to court, and the legal steps by 
which a final judgment is rendered by the court, is that the defendant shall 
have a full and fair trial on the merits of his case, with all possible opportunity 
to defend himself, and to set forth extenuating circumstances. This accords 
with the spirit of the common law and constitutional provisions. 

Now if the future defendant is willing to forego putting this machinery 
into motion, he may waive these rights by signing a judgment note for his 
debt. The judgment is the kernel of the nut, but as he has already' " confessed" 
it, — settled out of court, as it were, — everything else the court does, such as 
ordering execution on defendant's property, etc., is merely routine, and can 
be disposed of in a few hours. If it were necessary to bring suit, serve the 
writs, conduct the trial, get judgment, and finally to secure execution upon 
an ordinary note it might take several months. Possibly more than a year 
would be required in the congested condition common to courts at most 
commercial centers. If the defendant is in a critical financial condition, 
with numerous creditors, the advantage of being early upon the grounds is 
apparent. 

382. CHECKS. — Of all commercial paper, probably checks 
are in most general use, supplying a convenient medium for trans- 
mitting funds between banks and bankers and their customers. 
By the authorities, a check is a " draft upon a bank or banking 
house, ordering the payment of a certain sum of money, abso- 
lutely, and upon demand, to a certain person therein named, or 
to him or order, or to bearer," It is by its face an appropriation 
of so much money belonging to the drawer which is in the hands 
of the drawee. The identity of the drawee, whether a bank, in- 
dividual, partnership, or corporation must be expressed on the 

217 



§ 383 CONTRACTS 

paper with sufficient clearness so that the holder may know upon 
whom to call for payment. 

383. Presentment. — A check must, within a reasonable time, 
be presented to the party upon whom it is drawn for payment, i.e. 
to be '' cashed." What is a reasonable time depends upon cir- 
cumstances and the customs of trade. The following rules are 
safe : If the holder of the check and the banker are in the same 
town or city, it should be presented not later than during business 
hours of the next week-day after it is received. If these parties 
are in different places it must be forwarded on the next business 
day, or earlier, to the banker's city to be there presented by the 
owner's agent on the next business day after its receipt. 

Checks are paid in the order of their presentment, not in their 
order of issue, — another reason for diligence in presentment. 
If a check has been lost it is the duty of the owner or holder to give 
immediate notice to all the parties interested, so as to prevent 
payment to any one not entitled to receive it. 

384. Protest. — In a technical sense, protest means the formal 
notice executed by a notary that the instrument has been dis- 
honored; as used in business, it includes all steps necessary to 
charge an indorser. The effect of protest for non-payment, when 
accompanied by notice to all the parties on the paper, is to make 
all of them hable to the holder of the paper for its amount, with 
damages. 

When payment has been refused, the holder should take the instrument 
to a notary whose first duty is to make a formal demand for payment, which 
being refused, he must so certify. It is customary for the notary to give 
notice to all persons secondarily liable, though this is held not to be a part 
of his official duty. Protest must be made upon the day of its dishonor, 
unless circumstances beyond the holder's control prevent. And the paper 
must, as a rule, be protested at the place where it was dishonored. 

It has already been said that notice is necessary to bind the indorsers. 
This is a right which they may waive should they see fit. It is accomplished, 
frequently, by stamping the words " No Protest " with their endorsement. 
The effect is, not that the indorser varies his liability in any way, but that 
he is willing to be bound without the formalities of protest. Incidentally, 
there is a saving of notary's fees for protesting. 

385. Duty of Bank. — The bank must honor the checks of its 
depositors to the extent of their funds, though it must have time to 
make proper entries in its books to ascertain the state of de- 
positors' accoimts. It is the bank's duty to satisfy itself that a 
bona fide holder of the check presents it, — and it pays at its peril. 
Hence if a forged indorsement is the basis of their payment, the 
bank will be hable to pay the same over again to those rightfully 

218 



NEGOTIABLE PAPER §388 

entitled. A bank is not bound to pay unless it is in full funds; 
neither is the holder bound to accept part payment from them, as 
he is entitled to the whole. The holder cannot safely part with 
the check unless for the whole amount. The bank is entitled to 
possession of the paper since that is its voucher for funds paid out. 
If a check proves to be bad, i.e. there are no funds to meet it in the 
bank upon which it is drawn, the duty upon the drawer to make 
the payment in some other form is by no means discharged, since 
payment by check is a conditional one. 

386. CERTIFIED CHECKS. — A depositor may draw a 
check against his account, take it to the bank and have it '^ certi- 
fied " which is done by a bank officer writing " Certified " with his 
name or initials on its face as a memorandum. The drawer then 
hands this check to any one to whom he may be indebted, or who 
wishes to hold some security from him, and the recipient is excused 
from the rules as to prompt presentment. 

The effect is that the bank has assumed an unconditional obligation to 
pay the amount of the check whenever presented, and has in fact set apart 
sufficient funds to satisfy it, charging them against the account of him who 
made the check. This obligation renders the paper as good as bank-notes 
(currency), whereas in the case of an ordinary check the significance and 
validity of the transaction by which it changes hands may be marred by the 
condition that the drawer has no funds (or inadequate ones) to satisfy the 
check when presented. Thus certification is a great protection to the holder 
of the check, putting the bank's credit in place of that of the drawer. 

For these reasons, most bids for engineering construction are 
required to be accompanied by certified checks of large denomina- 
tion, to be returned in case the bid is not accepted, or be forfeited 
if a contract is not entered into after being awarded, etc., etc. 

387. This practice of requiring certified checks of bidders has evidently 
grown up on the theory that a contractor's fitness to undertake the work in 
question and his general responsibiUty are to be measured by the size of his 
bank account. It has been justly urged that this view is fallacious. A 
bank would, as a matter of ordinary business, certify a check for a new de- 
positor as quickly as for an old one, the only prerequisite being a deposit 
at least equal in amount to the face of the certified check. Thus the principal 
purpose for requiring such checks in engineering work might be largely 
defeated. The modern and more satisfactory way is to require a performance 
or fidelity bond of a Bonding and Security Company, who, like all others 
doing an insurance business, investigate their risks before accepting them. 
Plainly a bank never does this. 

388. BONDS. — A bond is a written contract, under seal, 
whereby one person binds himself to pay a specific sum of money to 
another. When expressly negotiable in form, or clearly intended 
to be so, it is practically equivalent to a promissory note. This is 
an ordinary bond, and is a promise to pay absolutely. It is much 

219 



§ 389 CONTRACTS 

used by municipal and other corporations for the purpose of rais- 
ing money on long-time loans, for improvement of plant, etc. The 
money for meeting the bonds at maturity is commonly set aside 
from the annual earnings or taxes, and placed in a sinking fund. 

Another sort of bond, frequently met with by the engineer, is where the 
payment is made to depend upon a contingency, which, if the contingency 
does not happen, the promise in the bond is to be of no effect. Such are 
the " faithful performance " bonds, so common in contract work, and also 
" bail-bonds " given by " bondsmen " to secure the personal liberty of a person 
under arrest in a civil process. (See also § § 432 and 31.) 

389. The essentials of any bonds are: Proper parties, seal, 
signature, dehvery and acceptance. The discussion of these ele- 
ments under promissory notes (see § 356) will apply here also. 
Corporation bonds are frequently issued with small notes, known 
as coupons, attached, and when they are severed from the bond 
they are promissory notes for the payments of installments of 
interest when the coupons mature, i.e. when the interest becomes 
due. When thus detached these coupons are negotiable by 
dehvery, and the bond need not be produced when the coupons 
are presented for payment. 

390. OTHER MERCANTILE PAPER. — In closing this hasty 
treatment of the subject, a few definitions of other types of 
negotiable paper may prove useful. 

The word " hill,^' wherever used heretofore, means " Bill of 
Exchange." This is an unconditional written order from one per- 
son to another, directing the latter to pay to a specified person 
a certain sum named therein. The word '' Draft ^\ is more com- 
monly used for the same thing. 

A Bank Note is a promissory note payable to bearer on demand, 
issued by a bank under authority of law, and used as a circulating 
medium. 

A Letter of Credit is a letter of request, whereby one pereon, 
usually a merchant or banker, requests some other person to 
advance money, or to give credit up to a certain amount to a 
third person named therein, charging it to the writer's account. 
This is a scheme much used by travelers, who, before leaving the 
home country, purchase such a letter of a domestic banker who 
has correspondents abroad. Such an instrument is not negotiable 
in the usual sense. 

A Bill of Lading is a written acknowledgment by a carrier that 
he has received the goods for shipment by land or water. It is 

220 



NEGOTIABLE PAPER §389 

also a contract for such transportation, and a contract to make 
delivery to the person named in the receipt, or to his order. A 
bill of lading is not so perfectly negotiable as a promissory note or 
check, but yet passes freely from hand to hand. Many non- 
negotiable bills are issued, however. 

Should opportunity present, the student is advised to pursue 
this subject of Negotiable Paper further under the topics: Altera- 
tions, Defenses, Rights under Overdue Paper, Holder in Due 
Course, etc., etc. 



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222 



QUESTIONS 

Questions on Chapter VIII 
NEGOTIABLE PAPER 

1. What is meant by the " law merchant "f How is it estah- 
Lishedf 

2. Explain why the engineer should he familiar with the general 
rules of the law merchant. 

3. What is meant by " negotiable paper "f How is modern 
business largely done? 

4. Distingttish between negotiability and assignability. 

5. Emimerate the essentials to negotiability. 

6. How have these essentials become recognized? 

7. Explain carefully the meaning of rule No. 2. 

8. " To pay a definite siim^/' — elaborate upon this rule. 

9. What is meant by " fixed or determinable time ^^? State the 
effect of a contingency. 

10. *' Words of negotiability j^^ — give meaning and importance. 

11. Explain meaning of rule No. 5 as to certainty of persons. 

12. State carefully who can make negotiable instruments. 

13. What are a corporation's powers with reference to issuing 
negotiable paper? 

14. How must an agent sign to relieve himself of responsibility? 

15. Why are fiduciaries not allowed to bind their trusts by notes? 

16. What is the rule as to effective signing? How made? 

17. Suppose signing is in a trade name, — what result? 

18. What effect does a partner's signing have? 

19. Recite upon joint signing. 

20. What is the result if a signature is induced by fraud? Or by 
mistake? 

21. When is it necessary to date a note? Why? 

22. What is effect and importance of words ^' Value received "? 

23. What is the essential element of delivery? 

24. Explain delivery in escrow. What is the test question? 

25. What are the liabilities of one who makes a negotiable in- 
strument? 

26. Name four different ways in which the maker may be dis- 
charged. 

27. Explain carefully the whole matter of " Dishonor." 

28. What is the purpose of " accommodation paper "f 

29. What is the liability of an accommodation party? 

223 



CONTRACTS 

30. What is effect of indorsement? How accomplished? 
. 31. Name tJte different indorsements. 

32. Which is better, indorsement " in full," or " in blank "f 
Tell why. 

33. What is the effect of a restrictive indorsement? Made when? 

34. What does an indorser warrant? 

35. Under what conditions is the indorser discharged? 

36. What is the purpose of the rules governing negotiable paper? 
How accomplished? 

37. Explain presentment of a bill or note. What points must be 
observed? 

38. What is the use of a judgment note? Why or when would 
you prefer one? 

39. What are the rules as to presentment of checks? 

40. What is meant by " Protest "f By " No Protest "f 

41. What is the bank's duty as to checks? 

42. What is the purpose of certified checks? Do they fulfill it? 

43. What are bonds used for? By whom? 

44. Mention other kinds of mercantile paper, 



224 



QUESTIONS 

QUESTIONS FOR GENERAL REVIEW 

1. A, about to build, engages an independent contrator, B, to 
put in foundations requiring considerable blasting in rock. In 
doing this X's adjacent building is seriously damaged. Has X any 
action for damages? (a) // so, against whom? State why. (6) 
Give, if you can, any possible exceptions to your rule. 

2. A and B own all the stock in the X corporation, and in their 
own names execute a deed of real estate belonging to it. (a) Does 
the title pass? Explain why, or why not. (b) Explain " ultra 
vires " and tell if it applies here. 

3. Enumerate leading statutory restrictions to which engineering 
contracts must commonly be made to conform, (b) Illustrate what is 
meant by " gratuitous promises.'' 

4. In law of sales, explain what is meant by " reservation of 
jus disponendi." When and for whose benefit is the principle 
applied? 

5. A says to B, " / will put in your cellar wall for $260,'' and 
B replies, "All right." When work is three-quarters done there is a 
dispute as to quality of stone for top courses, and A is ordered to quit 
the job. B refuses to pay for the work done, arguing (a) there was 
no binding contract, and (b) if there was a contract, it has been 
breached by reason of A's not doing the work to his satisfaction. Dis- 
cuss the rights of the parties, naming the principles involved. 

6. Illustrate proper and improper delegation of authority, in 
agency. 

7. Explain meaning and quality of estate called " fee simple." 
(b) Upon what theory or principle does " title by adverse possession " 
rest? 

8. The great majority of lawsuits by contractors arise over exca- 
vation, or meeting unexpected difficulties in foundations, or because 
changes in plans are required. State clearly how you would pro- 
vide against these troubles. 

9. A orders of B a water-wheel of peculiar style not usually kept 
in stock nor available for general trade. Upon completion, A re- 
fuses to accept it. If the contract was not in writing, can B collect? 
Give your reasoning. The value of the wheel is $800. 

10. What do you consider to be the leading principle studied by 
you under the law of agency? Cite, if possible, an illustrative 
instance. 

11. (a) State leading analogies and differences between partner- 
ships and corporations, (b) What has led to the " corporation 
habit "? 

12. A. B. & Co., makers of high- lift diaphragm, pumps p lace some 
on 10-day s trial in the sewer trenches of X, contractor. He is not 
satisfied of their fitness within that time, but a week later decides he 

225 



CONTRACTS 

does not want them. The A. B. Co. refuses to take tJiem hack — and 
sues him for the price, (a) What type of contract is this? (b) Must 
X pay? (c) When did title pass, if at all? 

13. The area of very valuable city property is in dispute, in a 
suit to enforce the sale of it. The work of seller s surveyor has 
error of closure — 1:1,000, while a survey by adverse party shows 
error of 1:18,000. The difference in value by the two surveys is 
$2800, Argue for the side you believe entitled to win. 

14' Define " proximate cause,'' stating where, when, with what 
effect, and under what circumstances the rule is applied. 

15. (a) Compare mode of origin of common law, and of statutes. 
(6) Which has precedence? (c) Tell which you prefer to study, 
giving reasons. 

16. A was agent of the M Fire Insurance Co., and made out a 
policy on T's building. It was printed in the policy that it should be 
void if gasolene was kept in the building without written permission 
in the policy. T represented that it was necessary for him to have a 
small amount of gasolene about, and to induce him to take the policy, 
A wrote the desired permission into it, though he had no authority to 
do so. The building was burned, and the Insurance Company re- 
fused to pay on the ground that the policy was avoided by the keeping 
of gasolene. What rights, if any, has T against A? 

17. When parties are negotiating by mail under what circum- 
stances does the mailing of a letter rather than its receipt fix tJte 
rights of the parties? 

18. What is a principals liability for the willful torts of his 
agent? 

19. Suppose A draws a check for a large sum on the B bank, 
payable to C, who does not present it for two years. In the mean- 
time the bank fails and can pay only 50 cents on the dollar. C then 
sues A for the balance of the face of the check, (a) Can he recover, 
and if so, how much? 

(6) // bank still were solvent, how much could C recover, if 
anything? 

20. The stockholders of The Western Contracting Company, a 
corporation, desire to effect its dissolution. How shall they go about 
it? 

Suppose it had been a partnership, with X, Y, and Z, as part- 
ners? 

21. In 1880 A and B omned adjoining lots. In 1881 C, by deed, 
granted to D both these lots. D occupied openly and without inter- 
ruption one-half of A's lot until 1905, claiming to own both lots. E, 
in 1884, entered upon A's lot and occupied the other half openly, 
and under a claim of right, until 1905. The statute of limitations 
runs for 20 years. Who owned the lots in 1905? 

22. A plotted land into houselots and streets. The public used tJie 

226 



QUESTIONS 

streets for twenty years. The streets were never accepted by vote of 
the town. B was injured by reason of a defect in one of them, and 
sued the town. ShoiUd he recover? Give your reasons. 

23. A agreed to build a house for B, for which B was to pay 
$5,000. After the house was partially built, A said to B, '* I wont 
complete your house for less than $6,000 because the price of lumber 
and materials has sharply advanced." B promised to pay the 
$6,000. Can A get the whole sum upon completing the house? Why, 
or why not? 

24. Damages are caused to adjacent lands by the pumping 
out of underground waters. Can the owner of the land obtain 
damages from the city which operates the pumping station? 

25. A contractor agrees to erect a ten-story office building, at 
a cost of $500,000. When excavations are made, the contractor finds 
that the soil will not sustain such a building unless extraordinary 
foundations are laid, at a cost of $75,000. The contractor refuses 
to go on with the work, as he says it will ruin him to complete it for 
the price agreed upon, (a) Has the owner any grounds for a suit 
against the contractor? (b) What can be done? 

26. The city has raised the grade of a street several feet in front 
of A's house. Can he collect damages? If so, of whom? 

27. A firm contracted with a city to lay brick pavements and to 
receive city bonds in payment. During the progress of the work 
the city discovers that its debt limit will not permit the issuance of 
such bonds. It orders the work stopped and the city treasurer asserts 
that he has no authority to pay for any part of the work. Can the 
contractor recover? 



227 



Chapter IX 
ENGINEERING CONTRACT-WRITING 

Probably a chief reason why engineering contracts and specifications so often 
bear bad fruit in contentions, lawsuits, and unsatisfactory work is that 
their writers did not fully perceive the objects and purposes of them, or 
did not appreciate the arduous professional and business preparation 
which an adequate discharge of the task imposes. This chapter seeks to 
illuminate these points by analyzing and discussing a few of the numerous 
points covered in modern contracts for important works using actual 
examples for illustration. It is attempted to show what matters may be 
properly treated in the " covenants," in the " general clauses," and 
in the " specifications." There is true economy in good specifications. If 
the reasons for imperfect specifications are stated, they can be avoided in 
a measure at least. ' Danger-signals should be displayed while penal- 
ties, liquidated damages, extras, and blanket clauses relating to the 
engineer's authority are under discussion. There is a rational method 
of studying specifications by first reducing each and ever\^ clause to its 
lowest terms, and then expressing it over a common denominator of 
justice and common sense. These and numerous other details are the 
matters treated in this chapter. It is placed at the end of the book be- 
cause as was said at the beginning, the complexities of engineering con- 
tracts are so great that the engineer can wisely attack the problem of pre- 
paring them only after an exacting study of the bulk of the material 
this book contains. 

391. INTRODUCTION. — Hitherto we have studied con- 
tracts of varying types, analyzing 
their essentials and remarking upon their typical differences. The 
average engineer, however, deals mostly with a special type, — 
contracts for erecting engineering structures. " Business " con- 
tracts he may meet less often, yet studying them has a positive 
value in familiarizing him with their origin and practical usefulness. 
It will also assist him to grasp more perfectly and promptly the 
full scope and significance of an engineering contract. * 

Such a preliminary study is in fact necessary for a proper under- 
standing of an important construction contract because such an 
agreement often estabhshes the rights of a far greater number of 
persons than does the average " business " contract ; moreover 
there are defined under it a greater variety of operations to be 
performed, under conditions much less determinate beforehand. 
And if this is true as regards comprehending engineering contracts 
when their execution has been or is about to be entered upon, 

* See Appendix Note 16. " Types of Engineering Contracts." 

228 



ENGINEERING CONTRACT-WRITING §393 

with how much greater force does it apply when the engineer is 
called upon to compose and draft such an instrument. 

Frequently legal counsel will be employed to frame the 
more formal part of important construction agreements (com- 
monly but erroneously called the contract, or '^ the legal part ") 
which part is properly designated as the " covenants/' or " General 
Conditions." Then the engineer will be called upon to furnish the 
part dealing more particularly with the technicalities of engineer- 
ing practice, — the " specific clauses " or " specifications." The 
term " contract," properly used, includes specifications and cov- 
enants, and there is no clear line of demarcation between them, 
as many matters inserted in the covenants by some engineers are 
by others as frequently placed in the specifications. 

It will be seen, therefore, that whether the engineer is called 
upon to furnish the " contract and specifications " in whole or in 
part, the more thoroughly he grasps the law of contracts generally, 
the more ably will he work alone in the matter or co-operate with 
a legal assistant. Having thus sought to show the relation of 
engineering " contracts and specifications " to our whole subject, 
let us consider some of their prominent features after which, it is 
hoped, we may attempt contract writing with an intelligent appre- 
ciation of the major problems before us. 

392. LANGUAGE TO BE USED. — The idea is common that 
the contract must be framed in technical legal language if it is to 
be effective. Perchance there is thought to be some cabaHstic 
mysticism in the uncouth legal terminology often employed, and 
the potency is supposed to be marred or lost if the fonns of these 
phrases are varied. But a little thought will show this view cannot 
be true, for the reason that the language used in the contract 
is naturally taken to be the best evidence of the real intention of 
the parties, — hence if they intend the ordinaiy and usual business 
relations should they not strive to express themselves in the 
simplest and most business-hke English possible? 

393. Further, if the document must, unfortunately, be 
brought into court to receive judicial interpretation, it should be 
remembered that those who compose the tribunal are every-day 
individuals, trained in and using all the common idioms of our 
language, just as did those whose will and intention the contract 
is supposed to register. As the Court proceeds to sift wheat from 
chaff in the mass, of verbiage often employed, it will, perforce, 

229 



§394 CONTRACTS 

employ the fixed legal rules of evidence and also the more elastic 
ones of ''construction" already discussed at length (see §§80- 
91) ; but it is obvious that the more simply, exphcitly, and cor- 
rectly the parties have expressed themselves, the shorter and 
more satisfactory the Court's task will be. 

394. In accord with the above, it is evident that specifications, 
also, should be written in plain language. Verbs should be 
properly placed with reference to their subjects and objects, and 
should be completely formed. All matters logically related to 
one another should be grouped, so far as possible, as this allows the 
spirit of each and every complete sentence composing the cor- 
related paragraphs to be carried in the mind of the reader. If 
this is done the necessary implications of the language used will 
(perhaps unconsciously) serve to buttress and reinforce the mean- 
ing of those sentences which both follow and precede the given 
statement. The net result will be clarity and forcefulness. But 
if cognate matters cannot easily be grouped, if a point has once 
been set forth at length it may subsequently be re-incorporated in 
the proper places by reference to the former section. (See 
§§405-6.) 

395. LENGTH. — It has been said that though brevity is 
the soul of wit, this Hterary criticism should be sparingly apphed 
to specification writing. Here, as elsewhere, true art is to be 
found in the golden mean of expression. On the one hand mere 
garruHty and verbiage is to be studiously avoided ; on the other, 
a cardinal tenet is, *' Let nothing be taken for granted." 

396. Complete specifications for important work must neces- 
sarily be very comprehensive, yet it does not foUow that they 
cannot be set forth in language and phraseology easily under- 
stood. It is sometimes said that a comma will not be allowed to 
spoil a contract, but the careless misplacing of one has often cast 
ambiguity on whole sections of a document. It should be noted, 
too, that while the author of a literary masterpiece may clothe a 
unity of thought in a variety of expressions, the task of contract 
writing must be approached differently. Thus a repetition of 
the same words and phrases wherever they properly arise is a dis- 
tinct step toward clarity and certainty of meaning, while the at- 
tempt to say the same thing a little differently each time is a cause 
of needless doubt and ambiguity. Ahnost invariably the law 
exhibits the tendency in expressi(m to sacrifice brevity for cer- 

230 



ENGINEERING CONTRACT- WRITING §398 

tainty by piling up synonyms, or modifying words of almost equal 
significance. This is the reason for the archaic and non-colloquial 
language and phraseology often exhibited by legal documents. 

397. PURPOSE in SPECIFICATION WRITING. — '^ The 
specifications and drawings together must give the contractor a 
clear and complete knowledge of the work he is to perform and 
the materials he is to furnish, and should contain all the informa- 
tion accessary to permit him to make an accurate estimate in 
advance, and to carry out the work properly, once it is under- 
taken. The specification is a general statement of the work to be 
performed, a description of the materials, the quality required, 
and the class of workmanship to be performed, with definite limits 
as to what tests must be made in order to determine compliance 
with the requirements of the contract, or what defects would be 
sufficient cause for rejection. 

'' Specification writing is an art which cannot be acquired suc- 
cessfully without practice and without broad knowledge, practical 
experience, a careful study of the various materials and methods 
of construction, and familiarity with their relative costs. As 
ideas and methods change and improve as a result of experience, 
so specifications should be changed to keep abreast of the times."* 
For a further development of these points, see Appendix Note 17, 
'' Objects of Specifications." 

398. ENGINEER'S PREPARATION. — A certain degree of 
preparation is a prerequisite for the successful undertaking of any 
work, and even with painstaking care mistakes will sometimes 
occur. Mr. J. A. L. Waddell, the eminent consulting engineer, 

saysif 

" To insure that all requirements have been met, it is evident that the 
engineer must familiarize himself with every detail of the work in hand. If 
he does not understand it himself, it is" certain he will not get a clear idea of 
what he wants into the mind of another. And even when the details of a 
scheme are perfected in the engineer's mind, it is difficult sometimes to make 
it plain to a contractor." 

Errors of judgment are easy to fall into, even by those mentally alert, 
so that, as Mr. Waddell puts it, " A given proposition may appear to the en- 
gineer in his office, prior to commencing work, very different from what he 
finds in the field after construction has begun. When the engineer discovers 
he has made a mistake he should not hesitate to acknowledge it, and to set 
about as best he may, to correct the error. To reduce mistakes to a minimum 
the engineer must be thoroughly conversant with all contingencies likely to 
arise in the execution of the work, but yet he should lose no opportunity to 
check against mathematical errors. He should familiarize himself with the 

* Bamford, Proc. Am. Soc. C. E. , XXXV, 1323. 
t Spec. & Contracts, Waddell & Wait, p. 7. 

231 



§ 399 CONTRACTS 

appliances ordinarily employed, and should so design his work that their use 
will not be prohibited. And in writing his specifications and in making his 
plans he should have a clear and complete mental picture of just what he is 
striving to attain." 

399. Then there is the distinctly commercial aspect of the 
engineer's task. While a considerable part of the covenants 
(§ 401) deal with matters for which a knowledge of business rela- 
tions is essential, and the specific clauses dealing with the design 
and details of construction are the part wherein the engineering 
education of the writer is most effective, yet it hardly seems fair 
to have it said that the '' contract " calls for legal services in its 
preparation, while specification writing is wholly and solely within 
the purview and training of the engineer. A truer view would 
seem to be that if an engineer is to be a good contract writer he 
should be thoroughly grounded on business principles (§5), and 
that it is only the subdivisions of specifications dealing with 
materials and methods which pertain distinctively to the engineer- 
ing field. 

400. ENGINEER'S DUTY to PREVENT LAWSUITS. — It 
is undeniable that lawsuits brought by contractors are often occa- 
sioned through the fault of the engineer. Some writers go farther 
and even blame the dishonesty of certain contractors also upon 
the engineers. If this indictment is true, it is doubtless because 
of an overzeal on the engineer's part in striving to protect his 
client's interests, and not because he deliberately intends to wrong 
the contractor. In any event, it is certain that lawsuits are the 
fruit of iU-prepared specifications, and are the inevitable sequence 
to the employment of the class of contractors which such ill- 
made specifications breed. (See Appendix Note 18, " True Econ- 
omy in Good Specifications.") 

Therefore the engineer owes a moral duty to his client and to 
his profession to be thoroughly informed upon both the technical 
and legal requirements of his task as the writer of an engineering 
contract and its specifications. (See § 398.) Experience has 
amply shown that where competent engineers have worked out 
good specifications in a given fine of work, in such cases lawsuits 
on behalf of contractors are at a minimum.* 

401. COVENANTS OR '' GENERAL CONDITIONS." — 
Mr. Wait refers to the contract as being divided into two parts, 

* See Appendix Note 19. " Trouble Breeders," and " Political Con- 
tracts." 

. 232 



ENGINEERING CONTRACT-WRITING §403 

covenants and specifications. He indicates that '^ covenants '' 
and '^ general condition clauses '' are in fact equivalent, and enum- 
erates* the matters usually treated under covenants : — the con- 
tractor's liability ; the consideration in the contract ; provisions for 
payment ; reference to accident liabilities ; the responsibility for 
negligence ; and provisions relative to the default or delay of either 
party. Here also will be found provisions relative to subletting ; 
reference to liens ; and to statutory requirements bearing upon 
the contract ; description of the parties, giving their residence, and 
if one is a corporation, its domicile and the place of incorporation. 
There should also be reference to any other instruments, such as 
ordinances or franchises which are intended to be incorporated 
(§ 405) and made a part of the contract, including positive 
reference to the plans and specifications under which the 
particular work is to go forward. It may be necessary, also, 
to incorporate the special Acts of Legislature or other public 
body under and by virtue of which the contract is made and 
carried out. 

402. Mr. Waddell (ibid. p. 60) says the dividing line between 
covenants and specifications is a most difficult one to draw, since 
every engineer has his own ideas as to what titles should properly 
appear under each heading. He advocates the view that such 
clauses as pertain to adherence to the specifications, alteration of 
plans, damages, extras, payments, responsibility for accidents, 
inspection, scope of contract, and time of completion are properly 
placed under either heading. He would place all clauses that 
relate to methods of construction, qualities of materials, character 
of the work, and the rules limiting the power and functions of the 
contractor and defining the authority of the engineer under the 
specifications. 

403. Practical Conclusion. — But in any event we may con- 
sider the above discussion as in a measure academic, since the im- 
portant thing to be borne in mind is that so long as provisions of 
real importance are inserted anywhere in the document they will, if 
not contradictory, inconsistent, or ambiguous, be given their due 
weight and value by a court of law. We are not now concerned 
with the task of persuading the contractor to adhere to the con- 
tract requirements in every last detail. 

Because, however, any large matter may be more thoroughly 
* Waddell & Wait, Specs. & Cont., p. 151. 

233 



§404 CONTRACTS 

and comprehensively treated if taken up systematically and 
according to a well-considered plan, the preparation of a contract 
(see § 398) for a large work will amply justify the expenditure of 
considerable time, effort, and money to secure the requisite thought 
and care in the content, arrangement, and sequence of its con- 
stituent parts. 

404. Contract-writing thus appears to be something of an art, 
and doubtless its importance to engineers generally can hardly 
be overestimated, for if the contract is incorrectly drawn there is 
almost certain to be serious loss and trouble on the part of some 
one. The severity of the task is thus summarized by Mr. Waddell 
in his advice to engineering students pursuing this subject: " Re- 
member that you cannot hope to learn to write even approxi- 
mately correct specifications until after you have had many years 
of practical experience in engineering work; therefore do not be 
discouraged if at first you find the task too great for your un- 
avoidably limited experience." While this statement is undoubt- 
edly true as regards the details of sound engineering practice, yet 
the present book aims to help the novice to avoid in some degree 
many pitfalls which he might otherwise have encountered. 

405. INCORPORATION BY REFERENCE. — It has been 
already hinted that the covenants and specifications may, in a 
given case, easily and properly become quite voluminous, yet a 
principal objective point of the present argument is that bulkiness 
should not and need not produce ambiguity. (See §§ 392-6.) 
As it is admittedly proper to make all reasonable efforts to con- 
dense and shorten the statements without sacrificing their full 
import, the importance of the legal doctrine of " Incorporation by 
Reference " is evident. 

'' Incorporation by Reference " refers to the legal effect of 
making an instrument in writing (or of course in print) a part of 
another by referring to the first document in such a way as to 
adopt its provisions, thus making them a part of the second docu- 
ment. The usefulness of this scheme is apparent, and while it 
does not quite fall among the rules considered under '' construc- 
tion of contracts " (§§ 80, et seq.) cases are common where other 
writings (whether directly referred to or not) will, if studietl, 
throw great light on the contract in hand. If, therefore, such 
other writing is in its meaning and effect incorporated by direct 
reference into it, the result of the interpretation of the present con- 

234 



ENGINEERING CONTRACT-WRITING §407 

tract will be more simple, certain, and satisfactory. It is a well- 
established principle that mere reference is effectual (as by using 
the words '' the same is hereby made a part of this contract "). 
Hence the labor of rewriting all the terms of the first instrument 
is thereby saved. 

Familiar instances are where contracts are entered into by authority of 
a special Act of Legislature. Complete proof that the party is " competent " 
is afforded by incorporating the instrument conferring the authority into the 
contract, as by reference to the appropriate year, chapter and section-number 
in the statute book. 

This is also similar to the practice of incorporating former deed-descrip- 
tions into current deeds of land, by reference to the date, place of registry, 
volume and page number on which a record of the earlier deed may be 
found. 

406. It is of great importance that the document referred to 
be positively identified. It must also be in actual existence at 
the time the contract is made. Reference to a contract or writ- 
ing " to be prepared " at a future time, is ineffective. Where 
the matter to be incorporated is in some printed form, of which 
there are numerous copies extant and in circulation, the task will 
be simple enough. In the absence of such a condition, the safe 
though laborious way is to incorporate the first document entire. 
There will, of course, be found all shades of circumstances between 
these two. 

407. PHYSICAL INCORPORATION. — Obviously it is a 
good and practical way to have the plans, specifications and 
covenants bound and fastened together as a physical whole, and 
then in each part refer to the others as '' hereto attached." Mr. 
Wait says, " Frequently specifications and plans are referred to as 
signed and attached, when in fact they have not been signed and 
attached. In such cases oral evidence may be introduced to 
show what specifications were intended. // they can be identified, 
they are in legal effect incorporated into the contract." It will 
be noticed that this statement introduces the bothersome legal 
question of proof by oral evidence, and the necessity for this 
should be obviated if possible. " Drawings exhibited to a con- 
tractor, when a contract is signed, if referred to in the contract so 
as to be identified [as by number, date, and signatures], become 
a part of the contract," he says further, but here again oral proof 
is necessary. Also, it is pointed out that an Act of Congress may 
be made a part of a contract by reference ; and so also, plans, pro- 
files and drawings may become part of an Act of Legislature, 

235 



§ 408 CONTRACTS 

though it is noteworthy that if the Act does not itself refer to them 
they cannot thereafter be used in construing the Act. 

408. In leaving this topic, it is well to note that while con- 
tracts and their attendant specifications may amount to hundreds 
of pages of printed matter in book form, into which sizable books 
may be incorporated by reference, yet at the other end of the 
scale they may consist of a not very lengthy letter, or of a mere 
sketch which describes the materials and methods which are 
to be employed. (Wait, same reference.) The important fact 
above all others is that the whole body of contract law will apply 
to each and every such contract, be its length two or two hundred 
pages. 

PRACTICAL SUGGESTIONS for GENERAL CONDITIONS 

CLAUSES 

409. In 1909 a committee representing six of the leading 
railroads of the country reported to the American Railway En- 
gineering and Maintenance of Way Association on " Uniform 
General Contract Forms."* While the task of the committee 
was " to prepare a brief form of general contract applicable to all 
classes of railroad work '' their report is chiefly confined to out- 
lining recommended components for such a Uniform General 
Contract Form. That is, they enumerate the matters w^hich it is 
agreed belong in a contract form designed to have general adapta- 
bility for railroad work, and rather carefully group and classify 
them. This report comes from a body of men familiar with the 
needs of this important field of construction work. Against them 
the charge of theorizing upon the subject certainly will not lie, 
hence it will be advantageous to the student or engineer seeking 
positive data if this committee is quoted extensively here, and its 
recommended details rather freely paraphrased. 

410. For purposes of study, the necessary components or con- 
stituent parts of the contract are by them placed in two grand 
divisions, with numerous subdivisions. The main divisions are: 

(A) A proper agreement form. 

(B) A statement of general conditions applicable to all classes 
of construction operations. 

411. (A) is amplified into seven other sub-headings. Thus, a 
proper agreement form should embody : 

*See Bulletin 108, Amer. Ry. Eng. & M. W. Assn., February, 1909. 

236 



ENGINEERING CONTRACT- WRITING §413 

(1) An introductory or opening clause. 

(2) A complete enumeration and description of all parties to 
the agreement. 

(3) A concise description of the subject matter, covering the 
nature and location of the work to be performed. 

(4) A statement of the time when (or under what conditions) 
the contract becomes operative and the limit, if any, for its 
duration. 

(5) An enumeration of the documents which accompany the 
contract. (§ 405.) 

(6) An exact statement of what is to be paid, i.e. the con- 
sideration. 

(7) A proper form of attestation [''Attest" is a technical 
term, signifying the witnessing of a written instrument by a per- 
son who formally subscribes to that fact], which should include 
the act of signing by all the parties to the contract, with seals if 
required, and witnesses to their signatures. If the contract is 
required to be recorded, then there must be a sufficient execution 
and acknowledgment before a notary public. 

412. (B) The Statement of General Conditions should cover 
the general stipulations of the contract [i.e. it should enumerate 
the matters upon which it is the principal object of the contract to 
effect a mutual understanding between parties]. There should be 
distinct reference not only to matters which of necessity must 
exist, but also to contingencies that would materially affect the 
contract, and there should be provisions covering the procedure 
in such events. 

413. [Thus far the work of the committee may be supposed to 
have been relatively easy. We have sought to show, heretofore, 
that anything which truly represented the " intention of the 
parties " (§ 81) might be properly embodied into a binding con- 
tract (with certain qualifications). It is perhaps needless to say 
that almost never are the conditions surrounding two contracts 
precisely alike. Thus if it were attempted to develop a standard 
form to be used invariably for any given fie d of work, it would 
almost certainly become so extremely voluminous as to seriously 
hamper its usefulness, because in it all sorts of variations and 
possible emergencies would have to be provided for. In such a 
standardized form there might be many provisions very nearly 
dupHcating each other, yet be so repugnant that both could not 

237 



§414 CONTRACTS 

possibly apply. The ambiguity would then arise as to which 
clause did express the intention of the parties. 

It seems that the committee sensed the foregoing difficulties, 
as they report that they spent much labor in analyzing a large 
number of contracts in use, besides consulting the available 
authorities. They found a great variety of groupings of the 
matters commonly included under " General Conditions," but 
there was a notable lack of unity in the order of arrangement of 
these matters in the various contracts studied. In order that a 
railroad construction contract could be prepared in a systematic 
way, they therefore suggested that there should be twenty main 
topics, or headings under which the various '' General Conditions " 
should be grouped, — and this list of twenty topics may be a 
highly valuable one for the engineer to check off, if he is engaged 
in writing a contract for almost any sort of construction work. 
These twenty group headings for " General Conditions " follow, 
but as each of the twenty is subdivided from five to twenty-five 
times, the author summarizes and paraphases (for brevity) the 
most important of them. He also adds comments which may 
prove helpful to the student.] 

414. (1) Contractor's Understanding. — [In the expanded 
form of this heading, the meaning is seen to be that by signing the 
contract, the contractor warrants that he fully understands the 
following matters. That is, if he does not in fact understand them, 
yet he has waived his right to claim that he misunderstood them, 
or to say that he has suffered hardship for lack of understanding 
them. We thus hark back to that essential matter, '' The meet- 
ing of the minds." (See § 13 [4].) The contractor admits, 
therefore, that] he understands the plans, specifications, nature 
and location of the work, that he has in mind any and all matters 
which are likely to influence the work, understands the quality 
and quantity of material required, is aware that he is taking the 
work upon his own responsibility, on the strength of his own 
judgment and personal information, and that it is his duty to 
verify estimates. 

415. [According to the views of Mr. Wait {Engineering News, June 8, 
1905), in which doubtless most fair-minded persons will concur, it is unfair 
to the bidder to require him to assume responsibility for the estimate of 
quantities, since the engineer usually has weeks or months to verify and check 
them and should be able to command all necessary data, while the bidder 
must either spend a lot of time and money to make an estimate for himself 
(with small chance that he will ever be paid for his trouble), or, if he is unable 

238 



ENGINEERING CONTRACT- WRITING §419 

or unwilling to do this, he goes in blindly or bases his estimate upon figures 
which the engineer expressly disclaims responsibility for. Mr. Wait argues 
with force and warmth, that this procedure is a shirking of responsibility by 
the engineer, is unprofessional, unjust, and provocative of lawsuits. 

416. The provision that the contractor " understands " all 
matters hkely in any way to influence the contract, seems super- 
fluous. For if the matters which are seriously to influence it are 
within the control of either party, and they allow them to get 
beyond their control to affect the contract, they may be hable 
as on a breach. If the matters are not within the control of either 
party, it does not seem to advance the argument any nor add 
anything to the contract for the contractor to say that he under- 
stands that his work may be swept away by a phenomenal freshet, 
for instance. If the parties contemplate this contingency, they 
should say so in no vague terms, and proceed to describe the rights 
of the parties in such an event. ] 

417. (2) Scope of Contract. — The extent of the work or under- 
taking should be explicitly stated. The contractor is to furnish 
everything, to use improved appliances, and the prices are to in- 
clude all expense of whatever sort. It is mutually agreed that 
the '' intention " of the contract is that the work shall be carried 
out according to the true spirit, meaning, and intent of the plans 
and specifications. 

418. (3) Duration of Contract. — The time of commencement 
and of completion [if desired] must be clearly stated. The time 
may also be subdivided, and dates fixed for various stages of com- 
pletion, and directions given for prosecuting the work in order to 
complete on time. It should be stated that time is an essential 
element of the contract [if it is so] and that alterations shall [or 
shall not] extend the time. [See §474-(13)]. If the time is ex- 
t-ended, this is not to waive the right to terminate the contract, 
which right will exist if there is failure to complete on time [or as 
otherwise provided]. It should be stated what is intended in 
case the contractor reduces his force, or suspends work, and it may 
be provided that, if this happens, it shall not be necessary for the 
Company to wait until the time limit has expired before under- 
taking to complete for the contractor. 

419. (4) Plans and Specifications. — The work is to conform 
to the plans and specifications which are made a part of the con- 
tract (by reference [§ 405] or attachment) and are signed for 
identification. (§ 406.) 

239 



§ 420 CONTRACTS 

There may be a guaranty of the sufficiency of the plans and 
specifications, or it may be agreed that the contractor is not to 
take advantage of errors, omissions, and discrepancies in them. 
[It would seem that these two provisions must be used in the alter- 
native, only, for how can the engineer guarantee the correctness 
of his work with one breath, and in the next suggest to the con- 
tractor that if there are any blunders in his work, then will the 
contractor please be a gentleman and not try to crowd the engineer! 
[See also § 454 on Bad Specifications.] 

420. The true spirit, meaning and intent of plans and speci- 
fications may be amplified by stating here what the full purpose 
of the work is to be, what conditions it must fulfill, etc., and this 
will furnish a very practical " rule of construction " (§ 81) to assist 
all who may be called upon to interpret the contract. 

There may be conflict between the plans and specifications, or 
between the contract and specifications, or between either of them 
and the engineer's decision. Rules as to which shall have prec- 
edence may well be provided. (See § 83.) The power to inter- 
pret the plans and specifications is usually reposed with the 
engineer. If further plans are to be prepared, who is to make 
them, who shall verify them, and who shall be responsible for 
errors in them? 

421. (5) Measurement of Quantities. — It is often provided 
that the measurements, calculations, and classifications made by 
the engineer shall be final and conclusive. [But see Appendix 
Note 4, Implied Condition of Fact.] Prehminary surveys, 
measurements and estimates are not guaranteed to be correct. 
(See § 415.) The specifications may provide a way of measuring 
quantities, and the work must be done in accordance with it. 
Shall custom and usage (§§85-7) control in making measure- 
ments, or shall actual quantities be used? 

422. (6) Workmanship and Materials. — The workmanship 
and materials must be first class, and of the best kind as specified ; 
but if first class is not specified, then both are to be of the best 
kind customarily used on such work, and approval of them is to 
be secured before using them in the work. The contractor is to 
provide and protect materials and appliances, and to protect 
work from injury; to make good all defective work (before final 
acceptance) [see § 474-(15) ]; to provide facilities for inspection ; and 
to remove condemned materials from the site. If the contractor 

240 



ENGINEERING CONTRACT- WRITING §424 

refuses or neglects to replace defective work or materials, Com- 
pany may do so at his expense. The Company's right to have 
perfect work is not waived by approving and accepting improper 
or defective work. It is well to provide that the ownership of 
materials shall pass to the Company upon being delivered upon 
the site [or when attached to the soil (see § 181) or incorporated 
into the structure. ] 

423. (7) Conduct of Work or Undertaking. — It should be 
stipulated what degree of control of the work and of the work- 
men is intended. [See the whole topic of " Independent Con- 
tractor " (Sees. 172, et seq.) in this connection.] The order in 
which the work is to be performed, and the agreement as to the 
rate of progress of the work should both be stated. Provision may 
be made for the Company to increase the forces in case of delay. 
The contractor agrees that his relation to contiguous work shall 
be thus and so ; that he will not interfere with other contractors ; 
that he will remove all temporary structures, and dispose of waste 
materials ; that he will protect the tracks, and facilitate train 
movements so far as lies in his power ; that he will employ only un- 
objectionable employees, and will dismiss those who are objection- 
able to the Company ; and will not tolerate the presence or use of 
liquors on the work. He agrees to have a responsible head-fore- 
man always in charge and present upon the work [see § 474-(7) ] ; 
that notices by correspondence suitably addressed shall be bind- 
ing upon him ; that he will submit to the Company's exercising 
certain powers of direction over his forces ; and that he will pre- 
serve all reference marks, stakes, grades, and level lines given him 
in laying out the work. 

424. (8) Changes or Alterations. — The Company may reserve 
the right to make changes, alterations, and additions in the work, 
or to make alterations in the terms of the contract. These altera- 
tions may affect the sureties [App. Note 15, §§ 31, 109] and 
may vary the provisions as to liquidated damages [see Appendix 
Note No. 9]. If the alterations make the work more difficult, or 
result in extra work, it would seem that the contractor should be 
granted an extension of time, or excused for delay upon account 
of them; but it is not unfair to say that the Company's assent to 
make alterations is no agreement to pay for extras. If the 
changes result in reducing the amount of the work, the contractor 
is to have no claim for anticipated profits, nor shall the said 

241 



§ 425 CONTRACTS 

changes or alterations vitiate the contract. [See § 31.] The 
power to determine the value of alterations may be vested in the 
engineer. 

425. (9) Extra Work. — The contractor should give written 
notice of claims for extra work in case additions are made, and 
the value of such additions and alterations shall be determined by 
the engineer, who also has power to order such extras [see §§ 114- 
16]. [It seems better if a written order is given authorizing the 
extra work. In it the price agreed upon should be specifically 
stated. If the contractor and engineer fail to agree upon the 
terms, the Company may contract with a third party to do the 
extra work. The extra work may also be done by " Force and 
Material Account," which practically amounts to a " cost-plus-a- 
percentage " plan.] (See Types of Contracts, Appendix Note 16.) 

426. (10) Contractor's Risks and Obligations. — It is of the 
essence of the contract that the work shall remain in charge of 
the contractor until completed and accepted, and the contractor is 
to assume all risks and damages up to such time of completion and 
acceptance. [See § 172 et. seq.^ He shall be responsible for de- 
lays and damages to trains, tracks, structures, passengers, and 
employees of the Company, and for damages to all other persons 
or property. He is under obligation to serve aU notices required 
by law, and to secure all necessary permits and licenses ; to afford 
protection at crossings ; and to do all that is necessary to accom- 
plish the purpose for which the contract is entered into. [See 
§ § 41 7 and 420. ] The contractor is not to interfere with the Com- 
pany's agents or employees, nor to deny them entrance or access 
to the work. He is not to allow ardent spirits to be sold nor 
given away on the work. If the Company is to lay out the work, 
he is to furnish assistance, but if he is to stake out the w^ork him- 
self, or is to furnish the plans [or parts of them ] he is to be liable 
for his mistakes [compare with § 165], and must make good to 
third parties damages suffered by reason of defects in his plans. 
[These latter provisions hardly seem necessary, since it has 
already been shown (§ 159) that a person is in general liable for his 
acts, as well as for his failure to act.] It may be well to add a 
specific statement covering the contractor's risks and liabihties 
under " Force and Material Account." 

427. [As hinted in numerous places elsewhere, it is ver\' easy to overdo 
the clauses which load all possible risks and obligations upon the contractor. 

242 



ENGINEERING CONTRACT- WRITING §431 

If the contract-writer would candidly place himself in the position of the con- 
tractor who is bidding upon the terms he proposes, and only insert those con- 
ditions which he himself would willingly undertake, it is safe to say that 
contracting work would be much less a gamble than it is to-day. ] 

428. (11) Assignment of Contract. — Assignment of the con- 
tract is usually prohibited [for the reasons given in § 145], and it 
is commonly provided that sub-contracts shall not be made with- 
out the Company's consent. In such a case it will be well to 
define the sub-contractor's status [that is, whether the Company 
will recognize and deal directly with him or whether it will only 
recognize and deal with the principal contractor. See § 485, Sub- 
letting.] The contractor may still be required to give personal 
attention to the work, and not be relieved of the responsibility for 
its quality, etc., even though it is awarded to an acceptable sub- 
contractor. It is common to provide that there shall be no as- 
signments of moneys until earned [because it tends to make the 
contractor skimp and be careless with the work if the money to be 
received for it is assigned away beforehand]. 

429. (12) Payments. — [See also §§119, 121, 494.] The 
method of making payments should be stated clearly. The 
method of determining the amount to be paid, whether approxi- 
mate monthly estimates or progress payments [upon completion 
of various stages] are desired; what percentage of payments due 
are to be retained (see § 495) [and for what period of time]; how 
and when final estimate is to be made ; and the place of payment 
designated, all should be clearly stated. 

430. The Company may reserve the right to pay claisas which 
the contractor neglects to do, and to deduct them from the 
amounts due him on the estimates. [As this provision implies a 
distrust of the contractor's business capacity, and is open to 
serious abuse unless handled with the greatest circumspection, it 
is doubtful whether it is a wise one to insert.] 

If the basis of payments is a schedule of unit rates, this 
schedule must appear, and so also must a statement of the bonus, 
if any is contemplated [together with a careful statement of the 
conditions under which the bonus may be earned]. It is usual to 
provide that the contractor shall be paid upon certificate from 
the engineer. [When so stated it is a condition precedent, etc. 
See §74.] 

431. (13) Failure to Comply with Terms of Contract. —The 
conditions under which the contract may be cancelled should be 

243 



§432 CONTRACTS 

explicitly stated. The reference to forfeiture of contractual rights 
on the part of the contractor, as by the Company's completing 
work for him; his bankruptcy; his refusal or neglect to prosecute 
the work with sufficient force ; or his failure to meet bills promptly, 
— all should be explicit, if such conditions are contemplated. 

If the contractor fails to comply with the terms of the con- 
tract, it may be provided that his plant and materials can be 
used by the Company when completing for him, and that the 
expense so incurred may be charged to the contractor. [See 
§ 493.] If the parties agree to it, there may be a provision for 
liquidated damages [see App. Note 9], which shall accrue to the 
Company if the contractor fails to complete within a specified 
time. 

432. (14) Company's Protection and Security. — A bond, 
" conditioned " to secure faithful performance, is usually required 
of the contractor, and this bond must accompany the bid. It 
may be stated what type of bond or security is acceptable [that is, 
whether of a Bonding or Trust Co., or of private bondsmen]. The 
contractor is required to agree that he will indemnify the Com- 
pany against all damages and claims [arising through the con- 
tractor, or through his work. See exceptions to Independent Con- 
tractor Rule, § 176, etc.] He must further agree to protect the 
Company against all liens for labor and materials [by paying 
the amounts due, and thus releasing the liens ], and to protect them 
in suits arising over patents used by him in the work. If a certi- 
fied check or Government bond is the desired security on the 
'' bid-bond," it should be so stated. It is common to provide 
that the contractor shall keep the property covered by fire insur- 
ance during the course of erection, and in case of bankruptcy, that 
title of material shall pass to the Company. [Before inserting 
the bankruptcy provisions — however, legal counsel should be 
sought, because the National Bankruptcy Act views assignments 
of whatever sort with suspicion, and this provision might invite 
difficulty, rather than avoid it.] 

[On titles (15), (16), (17), (18), and (19), the Committee make 
no suggestions for matter to be inserted, but merely name the 
groups of provisions which they think should be further expanded. 
They will be named here, with brief comments by the author, ] 

433. (15) Disputes and Arbitration. — [Disputes will com- 
monly arise, if at all, in determining the proper classification of 

244 



ENGINEERING CONTRACT- WRITING §439 

work, and whether its quantity, quality, character, skill used in 
execution, and general sufficiency satisfy the requirements and 
whether or not work ordered is an '' extra '' (§ 114) or amounts 
to an '' alteration/' (§ 109.) It is common to give extensive 
powers to the engineer with reference to all these points, as per 
(20) below, and it is undoubtedly wise to provide a way in which 
arbitration may be had (see § 487).] 

434. (16) Litigation. — [The contractor is often made respon- 
sible (see No. 10) and answerable for all damage suits or other liti- 
gation incurred during the work, and by the contract the Com- 
pany expressly avoids any responsibility in connection with them. 
This will be seen to be a blanket clause subject to abuses, and 
§ 178 should be carefully read in this connection.] 

435. (17) Definition of Terms. — [This is a highly important 
matter since, by a careful definition of the important terms used 
in the contract, the parties furnish a pre-eminently practical mode 
of construing its meaning. [See also § 445-(4).] Typical matters 
to be defined are illustrated in § 474, (4), of the Charles River Dam 
Contract, given as EXAMPLE II later in this chapter. ] 

436. (18) Property and Right of Entry. — [The ownership or 
acquisition of site of the work; the duties of each party in this 
respect ; stipulation that Company or agents may at all times enter, 
etc., etc., — these and allied matters come under this title. See 
§426, §126, etc.] 

437. (19) Transportation. — [In this clause it is common to 
state the terms agreed upon relative to the transportation of men 
and materials to or from the work. It may be provided that the 
contractor's plant will be transported free over the Company's 
lines, etc.] 

438. (20) Powers of the Engineer. — The engineer is usually 
given power to explain the plans and specifications, to have super- 
vision and direction of the work, and to determine the value of 
work and materials. [It is most common to give him rather 
extensive powers of a discretionary sort, since the aim is to facili- 
tate and expedite the work. See §§ 487, 420, 421, 433, 490.] 

439. Sometimes it is provided that the engineer shall be sole 
judge to determine and decide all matters arising out of the con- 
tract, and that his decision shall be final and subject to no appeal, 
or that he may be an arbitrator. (See § 487.) [As shown under 
Public Policy § § 33-4; agreements whereby one forfeits his right 

245 



§ 440 CONTRACTS 

to be heard in Court, are void. It is not easy to see, either, how 
the engineer can be a genuine arbitrator, since the term implies 
that disputants lay their difficulties before the arbitrator who, 
being a disinterested party, dispenses justice between them. On 
engineering work, the engineer represents and is the agent of the 
Company, and is personally a party to the dispute. Therefore 
since no one but himself states the Company's case, he should not 
be expected to invariably assume an impersonal and unbiased 
standpoint. Generally he has already declared himself as very 
much interested and biased, so much so, that the contractor is 
quarrelling with him over that very point. See also § 490.] 

440. The engineer may be given authority to order extras, 
and make alterations and omissions. [Such a clause as this prob- 
ably means that such orders given by the engineer will bind the 
Company, but does not of course mean that the engineer can 
modify, alter, and order extras at his own pleasure, or in fact 
practically set aside the contract. There is an implied condition 
in the agreement which the contractor makes giving the engineer 
this power. See Appendix Note 4A.] It will be well to specify 
the duties of the engineer's assistants, his duty with reference to 
hues and levels, and that he may secure the dismissal of objec- 
tionable employees of the contractor. 

441. In submitting the report on which the above discussion 
is based, the Committee states that the above and similar subject 
matter has been before different Committees of their Association 
for about seven years, but without satisfactory progress, and that 
the present Committee was engaged upon it for a year. During 
this year, they claim to have only outlined their subject, and doubt 
whether they have even succeeded in classifying the various 
matters under their proper headings. In fact they submitted the 
report without recommendations, and asked for discussion by the 
Association's membership in order that they might make further 
progress toward a Uniform General Contract Form. (See § 461.) 
They reported having collected, stu(iied, and analyzed a large 
number of contracts used by various railroads, and to have con- 
sulted many authorities. If, therefore, no greater progress was 
made by this capable body of men actuated by a serious purpose, 
is stronger evidence needed to prove that the only way such a task 
can be satisfactorily ended is through a study and mastery of the 
principles, not merely by collecting examples? One who tries to 

246 



ENGINEERING CONTRACT-WRITING §445 

learn by examples only, which, though numerous and carefully 
stated, yet are wholly unconnected by a statement of the under- 
lying principles, is committed to a task well-nigh hopeless. 

442. The above Committee also pointed out that even if they 
should succeed in producing a uniform contract form, it could only 
embrace the most general matters or requirements, for all stipu- 
lations peculiar to specific types of construction would be ex- 
cluded, because these are a part of the specifications for that 
particular class of work. (See § 461.) 

443. GENERAL CONDITIONS IN A BUILDING AGREE- 
MENT. — Mr. Bamford* suggests the following practical points 
for insertion in the General Conditions of a building agreement. 
They are inserted here because they may prove helpful and sug- 
gestive to engineers writing contracts for other classes of work. 

444. (1) Checking Documents. — The contractor shall study 
and compare the drawings, specifications, and other information 
given to him by the engineer. He shall scan the figures, and any 
discrepancy, inconsistencies, or omissions of statement regarding 
materials and modes of construction, which he notes shall be 
reported in writing to the engineer. 

[There is a lack of warranty of results on the contractor's part when he 
undertakes to build according to "plans and specifications " furnished him by 
the owner. (See § 456.) It appears, therefore, that the above provision does 
not ask the contractor to warrant anything^ — but merely makes it his duty 
to check over and verify the data given, in order that he may detect any 
patent discrepancies. (Compare § 456.). 

The practical advantage of such a clause seems to be in slightly 
relieving the engineer's burden of verifying the data and might 
secure some mitigation of damages for the owner, in case the con- 
tractor sued for damages sustained by him through some error in 
the data furnished. That is to say, the owner might prove there 
was a' neglect of duty on the contractor's part.] 

445. (2) Materials and Workmanship, — states whether all 
new materials are required, or otherwise. The clause defines in 
detail what is meant when something is said to be of an " ap- 
proved " style ; when samples of proposed materials will be re- 
quired for approval in advance; and mentions the quahty of 
workmanship which the contract contemplates. [See § 422-(6).] 

(3) Scope of the Contract. — The exact limits of the contem- 

* Proc. Am. Soc. C. E., XXXV, 1348. 

247 



§446 CONTRACTS 

plated work are given, and if there are any exceptions which lie 
within its limits, they should be stated. 

(4) Definitions. — Certain of the more important technical 
terms and phrases which occur in the instrument, the units of 
measurement, what persons are meant by certain titles, etc., etc., 
all should be defined with particularity. [See § 474 (4) . ] 

446. (5) Drawings. — It is stated what existent drawings are 
incorporated into the contract at the time of its execution, and 
who is to furnish any additional drawings (if such are required), 
such as detail, or erection plans. Mention is made of the degree 
of completeness in detail required on such supplementary draw- 
ings, and that if they are to be made by the contractor, they must 
conform to the engineer's plans and specifications. [See § 419 (4). ] 

447. (6) Lines and Levels. — This clause states who is to 
furnish the lines and grades, and who shall be responsible for their 
accuracy. The burden is usually put upon the contractor to 
maintain them, once they have been given by the engineer. 

SPECIFICATIONS 

448. The specifications form an integral part of the contract, 
legally speaking, though engineers habitually speak of the two 
things as quite distinct. The specifications describe the work and 
materials in detail, and sometimes indicate the methods to be 
followed in erection. The '' general conditions " or '' covenants " 
contain a statement of the legal rights, and business relations be- 
tween the contractor and his employer. (See §§ 401, 409, etc.) 
They enumerate the attendant facts or circumstance under which 
the contract is to be performed. As the specifications indicate 
the nature, quality, character and form of the finished work, de- 
fining its characteristics both generally and specifically, it is 
apparent that they are a subject of paramount importance in the 
engineering field, where work is done so commonly by contract.* 

449. There must be a plan for even the simplest structure if the 
materials are to be economically disposed, and the more complex 
and extensive the structure the more study must be bestowed upon 
the plan and its specifications. (See § 397.) The plan alone will 
not always show sufficiently by its lines and diagrams the forms 
and purposes of its constituent parts, but it must be supplemented 
by clear and exact written language to indicate the quality of 

* Sec Appendix Note 18. " True Economy in Good Specifications." 

248 



ENGINEERING CONTRACT- WRITING §452 

materials that are to be employed, and the modes of execution by 
which the finished fabric is to be wrought. Thus the engineer's 
need of a thorough mastery of the subject matter, the abihty to 
analyze the inter-relations and sequence of operations in con- 
struction, the necessity for patient and prudent forethought, are 
aU self-evident. (See § 398.) 

450. REASONS FOR IMPERFECT SPECIFICATIONS. — In Engineer- 
ing News, April 14, 1904, there are pointed out certain very cogent reasons for 
imperfections in specifications which may well be quoted here. " A company 
or corporation wants something done. It employs an engineer whose special 
knowledge and training seem to fit him for the task of working up the details 
of the scheme. His ideas of what he wants done are embodied in the drawings 
and specifications. As the engineer is not infallible, his drawings and speci- 
fications will not be an absolutely perfect embodiment of his ideas. This is 
one source of difficulty. Also, the ideas may be originally defective. This 
is a second source of difficulty. Again the contractor, who is also human, 
may with honest intentions construe the English language differently from 
the author of the specifications. This is a third source of difficulty. Or the 
contractor may pervert the meaning of the language. This is a fourth source 
of difficulty." 

451. CONTENTS OF SPECIFICATIONS. — Mr. Wait makes 

the following valuable suggestions : * 

" The specifications and plans should definitely describe the site of the 
structure, and should carefully define the limits and boundaries of the work, 
and this should apply to depth of foundations as well as to their areas. Much 
litigation would be avoided if provision was made, either by unit measure, or 
otherwise, to compensate a contractor for the additional and increased depth 
which foundations may require to be carried to secure stability. Plans not 
infrequently show the vertical depths required, while the specifications pro- 
vide that foundations shall be sunk to such depths as shall be satisfactory to 
the engineer. It is easy to see that great losses and hardship may thus ensue 
to the contractor, and that the only logical way is to consider what is shown on 
the plan as included in the contract; whatever is required outside, or beyond 
such limits is " extra " work for which additional compensation may be 
claimed." (See §§ 425, and 114-16.) 

452. " The specifications should definitely define the crude 
stock, the process of manufacture, and the finished materials of 
construction, not only positively as to the good properties they 
shall possess, but also negatively, naming defects that they shall 
not contain. They should provide for shop and field inspection of 
materials, and every class of work should be described in sufficient 
detail to enable the builder to erect and complete the structure 
without further direction or explanation from the engineer or 
superintendent." (See also § 397.) 

It has been said that the contract, plans, and specifications 
should together form a complete guide-book for the contractor, 
and for the owner's inspectors, by which the work is to beexecuted. 

* Waddell & Wait, Specs. & Contracts, p. 132-3. 

249 



§ 453 CONTRACTS 

Obviously, if this guide-book is the production of a skilled traveller 
over the intricate paths of the subject matter, but little additional 
oral interpretation will be required. 

453. IMPRACTICABLE REQUIREMENTS. — It is easy to 
fall into such errors as that of specifying impracticable sizes of 
materials, or non-commercial types of construction, uncommon 
designs, etc. This is particularly likely to happen when clauses 
are copied from obsolete or badly written specifications. It is said 
that the practice of " compiling " specification on the " scissors 
and paste principle," by taking clauses from old or inapplicable 
specifications, is one that leads an inexperienced writer into error 
more quickly than any other. For if he has any doubts as to the 
reliability of the description, they will be more or less discounted 
in his mind by the fact that that particular clause has been used 
before, — but he will be likely to disregard the circumstances 
attending the former use. 

454. BAD SPECIFICATIONS. " Omissions." — In Engi- 
neering-Contr acting, November 3, 1909, certain specifications from 
an un-named source are discussed, from which the following is 
extracted: 

The subject is Sewers. First there is a section which contains a clause, 
" And anything omitted which is necessary to complete said sewer and sewer 
inlets, the same shall be considered as appearing in both the plans and speci- 
fications." 

This is a clause often appearing in specifications, but the word- 
ing as given here is one that requires interpretation by the Court, 
in spite of the fact that another section declares the decision of the 
engineer on the true intent and meaning of the said specifications 
shall be final. The two clauses read together mean that if the 
engineer by reason of incompetency or neglect, or perhaps sheer 
laziness, omits to put in something that may be required to make 
a complete job, he can make the contractor do the work and his 
decision in regard to anything connected with it shall be final. 

A third section further declares: " In case of additions, alterations, or 
omissions, the engineer shall have the power to stipulate the cost or reduction 
to be charged or allowed for such changes, and the contractor must have the 
engineer's written orders covering the above, before such changes, additions, 
or deductions can be made or allowed." 

No Court would hold such a clause valid. Perhaps it is meant 
that the engineer should decide as to whether miy cost would be 
reasonable, but if he goes so far as ordering a man to do some- 

250 



ENGINEERING CONTRACT- WRITING §459 

thing, and also fixes the amount which is to be paid for it, he is 
likely to find himself in difficulty. 

455. Inconsistency and Ambiguity. — As an illustration of in- 
consistency and ambiguity in a contract, the following is taken 
from an actual case: 

One clause stipulates the amount of liquidated damages to be SIO for 
each day's delay in completion after a certain time, but in the preceding 
clause the time for completing the work is fixed absolutely at 50 days, and no- 
where is there a clause relating to extension of time for bad weather or other 
reasons generally to be considered in construction work. It is obvious that 
no amount of argument can make these clauses aught but incompatible. 

456. Warranties; an Example of Inconsistency in Specifica- 
tions. — The attitude of the courts is that even if the specifications 
require the contractor to warrant certain qualifications of the 
work, as for example, its water-tightness, resistance to winds, 
waves, floods, etc., still the contractor's undertaking so to build 
will not be considered as a warranty that the work will fulfill the 
con'ditions, where the sizes of parts, materials, or modes of con- 
struction, etc., are specified. That is to say, a warranty by a 
builder as to results implies that he shall have something to say 
about the design. (J. C. Wait, Eng, News, June 8, '05.) 

457. If it is sought to connect the foregoing with some elementary prin- 
ciple of contract law, it will be probably true to say that in the case just sup- 
posed, there was no genuine " meeting of the minds," i.e. no meaning of the 
same thing in the same sense. (See § 18- [4].) The owner is proposing that 
the contractor shall build and also warrant the fitness of the owner's plans. 
The contractor assents, in so far as the building is concerned, but the law 
implies for him the reservation that since he did not make the design, he shall 
not be responsible for its success. 

458. Why Poor Specifications Need Interpretation. — Specifi- 
cations are frequently written by some one more or less unfamiliar 
with the practical methods of doing the work, or worse than that, 
they are inherited, and out of date. In such cases interpretation 
is necessary, and permission should be given in the contract to 
make a reasonable interpretation. But engineering knowledge 
alone will not always lead to the proper result, since it has been 
well stated that a wide experience and knowledge of general 
business as well as of construction work, coupled with a full 
knowledge of existing conditions, are necessary for complete 
success. (See also § 398.) 

459. PRACTICAL HINTS ON SPECIFICATIONS. — In En- 

gineer- 
ing-Contracting, of February 3, 1909, there is an article, com- 

251 



§ 460 CONTRACTS 

mended editorially, which gives numerous practical suggestions for 
Specifications. Though quoted from an P]nglish writer, there is 
nothing in it which could not be applied equally well in American 
practice. Some of its most important points follow: 

(1) Language Used. — It is of the utmost importance that the 
specification should be lucidly written in simple language, the 
clauses arranged in logical sequence, and the description exact 
and complete without being verbose. Every item of the work 
should be allotted a separate clause, for otherwise confusion must 
ensue. [See § § 392-5. ] 

(2) Brevity. — As brevity, when consistent with complete- 
ness, is the hall-mark of a good specification, it should contain no 
information which may be clearly shown on the drawings, as this 
would be a waste of labor besides being confusing, since it obscures 
the drawing with unnecessary writing, and overloads the speci- 
fication with identical information. 

The degree of detail entered into should be governed very 
largely by the magnitude and importance of the work, as it is 
obvious that the detail in the specification for a $250,000 job 
would be merely a display of misdirected energy if applied to the 
specification of works costing only one-tenth as much. [See 
§395.] 

460. (3) Definiteness. — A common fault is indefiniteness of 
description, generally arising because the writer does not have a 
clear notion of the work or materials which he attempts to de- 
scribe, or it may be due to obscurity in the language used, or to 
the misuse of certain words. [See § 398.] 

For example, " proper " and " sufficient," though widely used, are here 
condemned, since it is well argued that the engineer should know what -is 
proper and sufficient, and describe it in precise terms. Failing this, he is 
only opening the way for trouble when it becomes necessary to interpret these 
words in terms of actual materials and workmanship. 

(4) Uniformity of Treatment. — It has been observed that in- 
experienced writers expand into unnecessary verbiage when deal- 
ing with matters most familiar to them, but dismiss some equally 
important point with a brief direction that " the work shall be 
done to the satisfaction of the engineer." In the latter case it is 
suggested that a fair implication from the language is that the 
writer did not himself know just what was wanted. A legitimate 
use of the phrase is in a general clause referring to the whole work. 

A case of this uneven description cited was in a sewerage job evidently 

252 



ENGINEERING CONTRACT- WRITING §463 

requiring but a moderate amount of cement, yet the detailed tests for Port- 
land cement were set out at great length. None of the tests were in fact 
applied, and apparently were not intended to be, but the whole description 
was taken en bloc from another specification, presumably with a view to over- 
awing the contractor. [See § 453. ] 

461. MOVEMENT TOWARD STANDARD CLAUSES. — 
Mr. William Bamford, in Proc. Am. Soc. C. E., December, 1909, 
gives the results of considerable study of Building Specifications 
and Contracts. His effort was to formulate suitable expressions 
for the relationships which ought to exist between the parties to 
construction contracts, — building agreements in particular. He 
acknowledges the labors of various committees of architectural 
societies whose efforts for a number of years past have been toward 
uniformity or standardization of contract forms, but devotes the 
bulk of the paper to a form of agreement which has been developed 
during thirty years of experience and of effort by the Royal In- 
stitute of British Architects, during which time many eminent and 
experienced men have contributed their labors to it. Mr. Bam- 
ford has frankly attempted to revise and adapt this English docu- 
ment (last officially approved in 1903), to American conditions 
and practice, though adhering as closely as possible to the original. 

462. He argues, moreover, that while many of its provisions 
are untried and new in American practice, they have in fact stood 
the test of time and litigation for over thirty years in Great 
Britain. Since the systems of jurisprudence of England and of 
the United States are fundamentally the same, there is much more 
warrant for the effort to introduce these provisions into American 
practice than to start independently and attempt develope entirely 
new ones. 

As the purpose above stated makes the treatment of the prob- 
lem particularly valuable for study by young engineers during the 
period of their professional education, and as the engineers of the 
future must be reached through the students of to-day, some of 
the more prominent features of Mr. Bamford's paper have been 
summarized herein. The reference to the full text has been al- 
ready given. There is an abstract of the paper in Engineering-Con- 
tracting, January 12, 1910. 

463. The labors of the Committees from the American Rail- 
way Engineering and M. W. Association have already been dis- 
cussed at length. (See § § 409 to 442.) It is perhaps probable 
that the movement for standardization is a laudable one. But the 

253 



§ 464 CONTRACTS 

student and engineer should recognize that from the very nature 
of things such a movement can never be wholly successful, since 
the wide variety of situations to be met necessarily limits the field 
of usefulness for any given type of uniform contract. It should 
also be recognized that no amount of standardization of forms can 
supply a lack in knowledge of common contract principles on the 
part of those who are to use the standard contracts. (See § 441.) 

464. SUBDIVISIONS IN SPECIFICATIONS. — All the 

foregoing 
matter will serve to show that specification-writing is a subject of 
some complexity, or that, at least, it involves a great number of 
details. (See § 396.) This means that the writing of a given 
specification must be approached in an orderly fashion, and it is 
most convenient to treat each independent matter by means of a 
separate clause, of which there are naturally two classes: (a) 
General, referring to the business relations which exist between 
the parties for this particular piece of work, and (b) Specific 
Clauses, pertaining directly and solely to the construction and 
materials for the particular piece of work in hand. (See § 448.) 

465. The general clauses wiU contain a description of the work 
as a whole, touching concisely upon its broader aspects but ignor- 
ing the details, and it will be common to find in them the agree- 
ment as to times and methods of payment, alterations, liability 
for accidents, abandonment, time limits, arbitration, subletting 
the work, etc. (See §§401-2-3 on the point that there is no 
fixed line between general clauses in the *' contract " and in the 
specifications.) The guiding rule seems to be to group under the 
general clauses all those matters which do not pertain to any 
single part, but rather to the whole as one unit. (See § 471.) 

466. MODE OF STUDYING SPECIFICATIONS. — In study- 

ing spec- 
ifications as such, the tendency will be to accumulate a mass of 
details, perhaps important in themselves, but lacking the correla- 
tion which would arise by being referred, each in turn, to the broad 
guiding rules or principles upon which successful or adequate 
specifications depend. It may also be said that a scrutiny of 
even the longest clauses in existing contracts will generally show a 
meaning which can for purposes of study be adequately stated in a 
tenth of the words employed in the formal instrument. It is sub- 
mitted that until this analysis and condensation is made by the 

254 



ENGINEERING CONTRACT- WRITING §468 

student or engineer, he cannot judge intelligently whether his con- 
tract should contain that clause or not. 

467. The tendency to accumulate a mass of details may be 
overcome in great measure by grouping around a simple analytical 
statement of a central purpose the essence of all clauses studied 
looking toward the same end. A pursuit of this plan will afford 
material assistance to the student or engineer when he actually 
faces the problem of writing a contract and its specifications. In 
this method of study, it is obvious that nothing can take the place 
of a free use of note-book and pencil, a careful fixing of the atten- 
tion on the root-thought which every clause, section, or sentence 
is to express, and long-continued and laborious practice in making 
certain and unambiguous expression of that thought. 

Here the assistance of an untechnical friend will be of great assistance, 
for if he, unfamiliar with the subject matter, can understand what you mean 
by what you say, it is fairly safe to assume that a person who is familiar with 
the subject will be able to get your true intent. 

The contracts and specifications which follow are left in skele- 
ton form, and merely the headings to which the engineer may 
wish to allude are given. They are not supposed to be anything 
like a complete guide, nor even when set out somewhat fully are 
the clauses intended to be copied. But they are intended to repre- 
sent a mode of study and analysis which if diligently applied by 
any engineer or student to the contracts and specifications he 
meets in practice, must assist him to acquire marked facility in 
preparing such documents. 

468. Reasons for Present Method. — Two principal reasons 
may be cited why it is hoped this skeleton form of treatment will 
be found useful. They are : 

(a) The belief that the engineer who is entrusted with the 
writing of a certain specification will be more familiar with the 
details of that particular work than any other person whatsoever. 
Hence, it is probable that he can never find just what he wants to 
say in any book, since no two engineering problems are just alike, 
or call for precisely the same specifications, 

(b) No form of expressing the thought or purpose to be treated 
under each heading is, in general, attempted here. This is be- 
cause of the futihty of attempting to cover all possible variants 
in cases that may arise, and because the engineer may justly have 
very different views upon a specific point than did the engineer 
whose specification is before him. (See § 453.) Also, the works 

255 



§469 CONTRACTS 

on Contracts and Specifications by Messrs. J. B. Johnson and J. 
C. Wait show just what langua<]^e was used in a great number of 
past instances. This book is an attempt to analyze principles rather 
than to gather together all possible illustrations of those principles. 
(See § 441.) 

469. Conclusions. — Hence the lists of headings given here 
are not supposed to be at all complete or exhaustive even within 
the hmits they cover. Instead, the purpose is that they may 
serve as suggestions or memoranda of what frequently is covered, 
and which will, if checked off, assist the engineer to assure himself 
that he has not overlooked something of importance. Indeed, 
this Hst will have entirely served its purpose if in a given case but 
few of its headings are used, but it does in fact suggest to the 
engineer the things he wants to put into his contract. 

While it would be possible to extend almost indefinitely a list of 
topics which specifications might cover, and about which extended 
remarks and observations might properly be made, many of the 
points which follow have been previously alluded to in various 
parts of this book. Further comments will be reserved for state- 
ment in connection with the skeleton contracts and specifications 
which are to follow. These will be found to be but little more than 
a tabulation of headings taken from what are regarded as high- 
class specifications. The reasons for this style of treatment have 
already been given. (See § 468 and Appendix Note 20.) 

470. Situation Summarized. — If the engineer is uncertain 
upon a question of contract law involved in carrying out his inten- 
tions, this book purposes to assist him to correctly answer it, or 
at least to give him an intelligent conception of the precise legal 
point involved, so that he may successfully co-operate with a 
lawyer in its solution. If it is a question of standard modes of 
engineering procedure, obviously this book can be of little assist- 
ance, but the engineer must seek information in engineering 
treatises, or in the publications of experts in that specialty. And 
finally, if the problem is one of clear expression, his necessity is 
to sit at the feet of masters of rhetoric and teachers of English. 

EXAMPLE I 

471. As an example of compact analysis of the General Con- 
ditions in a very important specification, the following is selected 
from Engineering News, February 13, 1902, which in turn ex- 

250 



ENGINEERING CONTRACT- WRITING §473 

tracts them from the contract governing the construction of the 

New York Rapid Transit Railway. 

In brief, it is provided that the contractor shall, in strict conformity 
with the specifications, construct the railway, " Including therein the stations, 
side-tracks, switches, cross-overs, terminal yards, and all other appurtenances 
complete and ready for operation; including also all necessary construction 
of sev/ers along or off of the route of the railway, all necessary readjustments 
of the mains, pipes, tubes, conduits, subways, or other subsurface structures, 
the support and care, including under-pinning when necessary, of all buildings 
of whatever nature, monuments, elevated and surface railways, affected by or 
interfered with during construction and reconstruction of street pavements 
and surfaces," and that the contractor shall provide a complete equipment 
for the road according to the specifications. 

Provision was also made that the Commission might during 
construction amplify the plans and specifications ; that the 
acceptance of any part of the work and materials did not relieve 
the contractor from the obligation to furnish sound materials and 
good work; that any dispute as to the engineer's valuation of 
extra work and material was to be submitted to arbitration ; the 
time and mode of payment are specified ; and that the contractor 
should be personally responsible for all accidents to persons and 
property. 

The specification covering "Waterproofing"* is worthy of 
notice, as it is given in full, and outlines the methods for the 
highest class of work of this type. It is recommended as a source 
of information. 

EXAMPLE II 

472. The contract chosen as the second example was framed 

to cover a part of the construction of a large work of far-reaching 

import to two metropolitan communities. It may be assumed, 

therefore, to represent expensive legal and engineering services 

under modern conditions. 

(In the following illustrative material, there is first stated the subject of 
each clause or paragraph; then allied matters are mentioned which may be 
treated in the same paragraph. The matter which appears in parentheses 
is given by way of illustrating what has been, or may be treated, as a part of 
or cognate to the same subject. As brevity and compactness of statement is 
the one thing especially striven for here, the reader need not expect that every 
sentence will be completely rounded out, nor that he will not frequently need 
to supply a missing predicate, or to carry in his mind the " subject under- 
stood." Each topic is numbered for convenience of reference, merely.) 

It should be noticed, first, that by advertisement or otherwise, 

certain specific information is given to bidders. 

473. CHARLES RIVER BASIN, Boston, Mass. 

Points covered in notice " INFORMATION to BIDDERS." 
*Same reference. 

257 



§474 CONTRACTS 

(1) Title. States what is to be placed upon the sealed bid. 

(2) Place. Tells when and where bids will be received. 

(3) Signature and Form. Must be signed, and on a specific 
blank form. 

(4) Price. The price of each item, both in writing and figures, 
must be given. 

(5) [a] Check. A certified check must accompany bid. (On 
Bank or Trust Company, of certain place, in specified sum.) 

[b] Forfeiture. The check may be forfeited under certain 
named conditions. 

(6) Receipt. Check to be defivered to who will 

issue voucher for the deposit. 

(7) Bond. In the sum of will be required for 

faithful performance. 

(8) [a] Execution. Successful bidder is to execute the bond 
and contract within (15) days from time notice is mailed him that 
contract is ready for signature. 

[b] Forfeiture. Failure to do as above gives owner option to 
determine that bidder has abandoned contract, and proposal 
check is to be forfeited to (Note: Proposal should con- 
tain agreement to this condition upon part of bidder.) 

(9) Site. Contains description of test-piles, and wash-borings, 
with their location, if there are any. 

(10) [a] Quantities. Gives an itemized statement of quanti- 
ties estimated by the engineer. 

[b] Statement that all bids will be compared on the basis of 
this estimate. 

(11) Estimates, [a] Disavowal of warranty as to accuracy of 
quantities stated. [See §§ 415, 416.] 

[b] Reservation of right to increase or decrease amounts as 
deemed necessary by engineer. 

(12) Unbalanced Bidding. Warning against contractor's mak- 
ing unbalanced bid. (May lead to rejection.) 

(13) Rejection. Right is reserved to reject any or all bids, 
and to award to party whom owner beheves will serve his interests 
best. 

GENERAL PROVISIONS IN CONTRACT 

474. 1. Title of Work. (Subject matter of the contract [see 
§ 471], including its location.) 

2. Parties. Gives names and description of them. (Reciting 
Act of Legislature, or other special fact establishing competency 
of either party.) 

3. Scope. States in general terms extent of work to be done. 
[§471.] 

258 



ENGINEERING CONTRACT- WRITING §475 

4. Definitions, (a) Who are meant by '^ Commission/' and 
" engineer " ; explains what is included in '* Dam," '' Lock," 
'' Basin," ^' Harbor " ; what base is used as " Datum," and what 
materials shall be classified as "' rock " and as '' earth." 

The aim is to express fully the scope of terms employed. This 
renders construing them by the Court unnecessary. 

(6) Also, who is meant and referred to by the words " As 
directed," " as required," " as permitted," etc. And who has 
the power to '' approve," " accept," '' be satisfied," etc., when 
the work is required to be *' acceptable," " approved," '^ satis- 
factory," etc. 

5. Power of Engineer. Aim is to make engineer's judgment 
and determination final and conclusive on all questions that may 
arise under the contract. Also to make such verdict a condition 
precedent to the contractor's receiving any money under the 
contract. [See §§ 433, 438, and 490.] 

6. Occupancy of Site. (Gives the limits of property that 
may be occupied by the contractor.) 

7. Directions. (Provision that superintendent or foreman of 
contractor shall always be present on the work, and that orders 
given him shall be binding upon the contractor, should he be 
absent from that place.) 

8. Lines and Grades. (To be given by engineer, contractor 
giving assistance, and furnishing materials for the same.) 

9. Sanitation. Suitable conveniences must be furnished for 
laborers. 

10. Cleaning-Up. Site to be carefully cleaned up after com- 
pletion of work. 

475. 11. Liquor. (Use of Hquor by workmen prohibited.) 

12. Ambiguity. Inconsistencies between plans and specifi- 
cations are to be explained by the engineer, whose interpretation 
shall be binding upon the contractor. [See § 490.] 

13. Time, [a] Time of entering upon and of discharging the 
contract. 

[6] Statement to the effect that time is " of the essence." 
[c] Completion by stages at stated times. [See § 418.] 

14. Accessibihty. Access to be permitted to the work at all 
times to owners, their agents, or engineers. 

15. Defective Work. (Inspection by engineer shall not re- 
lieve contractor ; he must make his work good any time before its 
final acceptance if it has been overlooked. See § 422.) Con- 
demned materials to be removed. 

16. Ownership. Title of materials annexed to the soil to pass 
to owner, i.e., other party to contract. [See § 181.] 

259 



§476 CONTRACTS 

17. Workmen. Only competent workmen to be employed; 
to be discharged for cause by engineer. 

18. Delay. (If by agreement either party is to secure posses- 
sion of the site, delay by him in doing so shall not entitle other 
party to damages, but extend the time.) [See § 492.] 

19. Legal Restrictions. Burden is placed on contractor to 
keep fully informed on State, municipal, or National laws or ordin- 
ances (whether existing, or made during existence of the contract), 
which affect men or materials employed under it. [See § 25 and 
Appendix Note 6.] 

476. 20. Laborers, [a] It is stated whether and what pref- 
erence there is for laborers of any specified residence or nationality. 

[b] Hours of labor are defined. Farming out of commissary 
forbidden ; laborers to board where they choose. 

21. Supervision, [a] Personal attention of contractor is re- 
quired. States under what conditions, if at all, subletting will 
be permitted; and when subcontract may be terminated by 
engineer. 

[b] Contractor to be authorized to pay subcontractor's em- 
ployees, if latter defaults. 

22. Alterations. Changes may be made by the engineer be- 
fore or after beginning work without claims for damages or loss of 
profits by the contractor. [See §§ 109 and 424.] 

23. Indemnity. Aim is merely to make the contractor '' in- 
dependent." [See § 172, etc.] (Contractor shall take the risk of 
injury to persons or property on or about the work, and shall save 
owners harmless in all suits for labor or materials, patent rights, 
inventions, etc., used on the work.) 

24. Abrogation. States what shall constitute abandonment ; 
what the effect of assigning the contract shall be ; or that if there 
is unsatisfactory rate of progress, or violation of contract pro- 
visions, contractor may be ordered to quit. [See § 105.] 

25. Default and Completion. If contractor defaults, it is pro- 
vided how completion may be made. (It is generally at the 
expense of the contractor, the owner using his plant to do so. 
Money expended in this way shall be deducted from any due the 
contractor, and if amount is insufficient, contractor shall make it 
up. [See Appendix Note 7. ] ) 

26. Liquidated Damages. The sum to be paid as liquidated 
damages is stated, and also the conditions under which payment 
of the same shall become due. [See Appendix Note 9 and § 496. ] 

27. Extras. States how price of extras is to be determined. 
(Cost plus 15% ; engineer to have access to all accounts ; state- 
ments for extras must be made before 15th of month.) • [§ 116.] 

28. Estimates, [a] To be made when. (If work has been 

260 



ENGINEERING CONTRACT- WRITING §478 

done, and materials of certain kinds delivered during the month, 
then monthly estimate to be made. Payment of estimate is to 
transfer title in the materials, but this is not allowed to prevent 
the engineer from rejecting the same, if not good.) 15% of pay 
to be retained until it amounts to [See §§ 494-5.] 

[b] Estimate Excused (if certain amount has not been done 
since last estimate) . 

[c] Estimates Oftener. (May be made if deemed necessary 
by engineer, or to assist contractor to better meet payroll.) 

[d] Final Estimate and Final Payment. (When this shall be 
made; partial estimates and payments corrected in final.) 

29. Payment. Last payment to terminate responsibihty of 
owner. [See § 121 and §§ 494-5.] 

30. Waiver. No inspection, orders, measurement, or cer- 
tificate made by the engineer, nor any payment, acceptance, in 
whole or in part, nor extension of time, nor taking of possession by 
the owner, shall operate as a waiver of the conditions of this con- 
tract, or of any right to damages herein provided for. And 
waiver of one breach shall not be waiver of another breach. 

31. Remedies. All remedies herein mentioned are to be 
taken as cumulative, and each in addition to the other, but not 
in place of it. 

477. Next follow the SPECIFICATIONS [General Clauses ]. 

1. [a] General Description of the work, giving the salient fea- 
tures of its construction, and the inter-relation of its principal 
parts. 

[b] General plan of procedure in erection. (As where mate- 
rials will come from, be disposed of, etc.) 

[c] Wrecking and removal of existing structures which are 
covered in this contract. 

[d] Reference to place (in contract) where the specific related 
things will be found which contractor is not required to do. 

2. [a] Refers to general plans of the work, i.e. incorporates 
them, identifying them by title, numbers, signatures thereon, and 
date of making. (States where they may be found.) 

[b] Detail Plans. (To be furnished later by ) 

[Specific Clauses! 

3. Gives more specific description of the work. 

478. Coffer Dams. 

4. Location. 

5. [a] Gives contractor permission to build stronger and bet- 
ter, or to change design upon approval by engineer. 

[b] Requiring contractor to assume risk of sufficiency of dams. 
(In design or execution.) [But see § 456. ] 

261 



§479 CONTRACTS 

6. Guide Piles. Quality and sizes of timber, spacing, bearing, 
alignment and replacing of broken or improperly driven ones. 

7. Sheet Piles. Quality, and rules for inspection ; cutting 
off splines (modes of fastening) grooves. 

8. Metal. Ultimate strength, and quality. Upsetting of 
ends (may be required) of tie-rods. 

9. Earth FilHng. Quality of earth required, both inside and 
outside of dam. Finished grade, or elevation of earth. 

10. Sewers. (Sewer outlets or connections.) 

11. Removal of existing structures on site of dam. Owner- 
ship of materials (or may be re-used) . 

12. [a] Pumping Out. Shps of material provided against. 
Extra bracing (may be required). Kept free from water, and dam 
maintained in good condition. 

[b] Pumping for other contractors paid for extra. 

13. Removal of Dam. What may be left in place. 

14. Price for dams includes what. (Constructing, maintain- 
ing, and removal of same. Also temporary sewers and pumping.) 

479. Earth Excavation. 

15. Required for what. purposes, and structures in or adjacent 
to dam. Dimensions of excavation, or grade for same. 

16. Dredging, where required, and under what conditions it 
becomes " extra work." 

17. [a] Extra Earth for filling; where obtained. Final dis- 
position of earth (in dam, or elsewhere), rehandling of earth. 

[b] Use of hydrauhc plant for back-filling. 

[c] Prevention of washing of materials by current. 

[d] Settlement of fill to be brought to grade. Xo frozen 
material (without permission from engineer). 

18. Measurement of Earth. How made. 

19. Price of earth excavation includes what. (Pumping, bail- 
ing, damming, ramming, grading of surface.) 

480. Rock Excavation. 

20. [a] Where required. Care in blasting. Time of blasting. 

[b] Storage of caps and explosives separately. Precautions 
may be ordered by engineer in addition to city ordinances. 

[c] Disposal of rock. Measurement of excavation. 

21. [a] Riprap. Sizes and quaUty of stones required. Diver 
(may be required). Paid for by ton in place. 

[b] Price includes what. (Obtaining, transporting, and de- 
positing, and all other incidental expenses thereto.) 

481. Foundation Piles. 

22. Where required in the work. 

262 



ENGINEERING CONTRACT- WRITING §484 

23. Kind and quality of timber. Spacing and alignment (or 
as on plan) satisfactory bearing (or depth). Water-jet, shoes, or 
steam hammer may be required. 

24. Piles tied together before filling. Height of cut-off ; sound 
un-broomed heads required. Vertical and batter piles. 

25. Test piles may be required. (Extra.) 

26. Piles measured and paid for how. 
Sheet Piling. 

27. Dimensions and quahty of timber. Variety. Drive by 
water jet (?) How measured. (In place without allowance for 
waste.) 

28. Price includes what. (Furnishing, driving, bracing and 
incidentals thereto.) 

482. Cement. 

29. Inspection and tests by engineer. Well known brands. 
Rejection of inferior brands. 

30. [a] 30-day supply on hand, allowing 28-day tests. ' 
[6] Lots stored separately in dry place. 

31. Sand, — clean, sharp, coarse, no pebbles. 

32. Broken stone, or gravel, for concrete; sizes, screening; 
amount of fine materials allowable. 

33. Measuring of sand, stone and cement for mortar and con- 
crete. 

34. Mortar. Purposes and proportions ; mode of mixing. 

483. Concrete Masonry. 

35. Where used. 

36. Quahty and proportions of materials. 

37. [a] Mixing and placing. (In layers, but continuously. 

Under water; hand or machine mix; Inspection by ; 

wet or dry.) 

[b ] How in cold weather ; sprinkhng in dry weather. 

38. Bonding to Old Work. (Roughen ; clean ; mortar or grout 
coat.) 

39. [a] Finish of Exposed Surfaces. (Smooth forms, oiHng. 
spading ; pointing, floating, skim coat ; skilled labor.) 

[b] Granohthic Work. Mode of execution. (As extra?) 

40. Expansion Joints. (Where needed, and how formed.) 

41. Waterproofing. Where required; type called for. 

42. Price includes what. (Measured in place.) 

484. Ashlar Masonry. [In general, see Baker's Masonry, 
specials below.] 

263 



§485 CONTRACTS 

43. Uniform Coloring of Stone. Sample to be approved by 
engineer in writing. Evidence that quarry-supply is sufficient. 

Pipes, and Ducts for Electric Conduits. 

44. Single or multiple ducts ; cross-section what ; quality ; lay- 
ing; inspection (just before laying). Kept clear of mortar when 
laid ; use of mandrel and rods. 

45. How measured ; price includes what. 

MISCELLANEOUS CLAUSES 

Before taking up the next example of Contract- Writing a few 
special topics will be considered. These matters are not especially 
interrelated, and as the possible list is an interminable one, no 
claim is made here for completeness. The hst merely contains 
certain points where difficulty has been met. 

485. Subletting. — '' The contractor cannot sublet any por- 
tion of the work without previous consent of the city council in 
writing," — yet why does this old clause persist? ask the editors 
of Engineering-Contracting (November 3, 1909), who then proceed 
to handle the subject upon its merits: 

" The object of the city in letting a contract is to get the work done in 
accordance with the plans and specifications, and there should be no objec- 
tions made to subletting. The contractor should be permitted to do the work 
in any manner provided he is held strictly accountable. A general clause to 
the effect that the city council will not recognize any person except the con- 
tractor and will hold him throughout to a proper completion of the work will 
cover all that the clause here referred to is intended to cover. 

" Such clauses do not in fact prevent work from being assigned, transferred, 
conveyed, sublet, or otherwise disposed of, * * * if the contractor deems it 
to be to his interest to so dispose of any of his right, title, or interest therein 
to any person, company, or corporation. In fact circumstances sometimes 
arise in which it is highly desirable that something of this sort be done. "What 
is wanted in specifications is a little less legal verbiage and more good judg- 
ment." 

486. Arbitration Clauses. — Taken as a whole, the subject of 
arbitration in reference to engineering contracts is in a rather 
confused and unsatisfactory condition, though much discussion 
has been given it. The tendency of such clauses is to contravene 
the principles of pubhc policy, and they may be regarded as tend- 
ing to oust the courts of their proper jurisdiction. (See § 33, etc.) 
This element of public policy involved in arbitration clauses is the 
precise reason why the courts have refused to carry out some pro- 
visions, and why, therefore, the subject is in such an unsettled 
state. A few suggestions only, such as may assist in avoiding 
difficulties, will be attempted here. 

487t It will be observed that this matter is closely related to 

264 



ENGINEERING CONTRACT- WRITING §489 

the provisions governing the engineer's authority. Hence greater 
simplicity and satisfaction may result if the contract-writer first 
decides carefully, and with due regard to precedent, in just what 
matters the engineer is to have sole and absolute authority. Next, 
all matters likely or liable to arise which may require arbitration 
should be systematically considered and enumerated. Finally, 
the method for choosing the arbitrators, and the mode of making 
an appeal to them, should be clearly stated. 

The traditional position of the engineer has been that of 
arbitrator between the owner and contractor, and not the repre- 
sentative solely of one party. While theoretically correct, in 
fact it frequently does not exist, and frankly stated, the engineer 
is often an active partisan for the owner as against the contractor. 
However, this is not always because the engineer desires to be 
unfair, but because the provisions in contracts generally used 
make it extremely hard, if not impossible, for engineers to be fair 
if they try to conform strictly to the contract provisions. 

488. A useful arbitration clause , taken from English practice, provides that 
no appeal to an outside arbitrator shall be made during the progress of the work, 
but that disputes arising out of any matter contained in the contract shall be 
temporarily decided by the engineer, subject to further settlement at the 
hands of a referee after the work is done. This tends to prevent any dis- 
puted matters from causing any delay in the work. 

About the only practical brief suggestion that can be given in 
reference to arbitration is to the effect that blanket clauses, grant- 
ing unlimited authority to the engineer as arbitrator, are not 
likely to be enforced by the. courts. Perhaps a sure way to avoid 
trouble is for the contract-writer to place himself in the position of 
the contractor, and in all fairness ask if he himself would be willing 
to acquiesce in the provisions made. In brief, the Golden Rule 
would be highly apphcable, and its use a powerful preventive of 
lawsuits. 

489. It has been well said that the relation finally existing between 
owner and contractor as a result of the contract is not purely an engineering 
matter but largely one of business and human nature. The aim of each partv 
to a contract is primarily to get all he can out of it. Where the amount in- 
volved is small and the continuance of business relations is desired, — as in 
the case of retail trade, — the satisfaction of the purchaser is of prime im- 
portance. When a railroad has a large amount of work to do, a contractor is 
interested to give satisfaction in order that he may receive more work. Where 
the contract is large and the parties thereto will probably have no further 
business relation the aim of each is to get all he can and still effect a settle- 
ment without a suit. 

Between these conflicting interests of the principals the engineer holds a 
very peculiar position. He is in the employ of one of the parties, but must 
nevertheless be an impartial arbiter between the two. 

265 



§ 490 ■ CONTRACTS 

490. Engineer*s Authority. — It is not unusual to have a con- 
dition tliat the engineer shall have the exclusive right to authori- 
tatively determine the meaning of the contract. Such a pro- 
vision is often rather unsatisfactory to the contractor for num- 
erous reasons, but unless it could be shown that the engineer had 
deliberately shown prejudice, or partiality, the provision would 
probably stand. 

From the engineer's view-point, the chief advantage of such a 
clause is that it supplies a summary means of remedying the faults 
and supplying the omissions in a badly-drafted specification. 

An arrangement suggested as being more likely to satisfy both 
parties is for the engineer to have final decision as to workmanship 
and materials, and to provide for an outside arbitrator on all 
matters relating to payment, extras, contractor's delays, altera- 
tions, etc. There seems much to commend this. 

491. Opening up Completed Work. — It sometimes happens 
that work which has been carefully done will be buried up before 
it has received inspection. The same is also true at times with 
work that has been dehberately scamped. Thus it is possible 
for both sides to err in their zeal, and a hardship may be done if 
in framing the contract provisions it is not recognized as possible 
that mistakes may be made. For plainly if the work is ordered 
opened up and proves satisfactory then the contractor should be 
compensated, not for damages, nor yet as salve for affronted inno- 
cence, but just for extra work done. But if there is no provision 
regarding the matter, it is apt to be just so much more induce- 
ment to tricky contractors to bury their work as hastily as possible. 
Contract-writers recognize the question as one of some perplexity. 
It has been suggested that perhaps the fairest method is to pre- 
scribe that if the work upon being opened up is found satisfactory, 
the labor required shall be charged as an extra. But if it is found 
not to be in accordance with specifications, then the cost of so 
opening shall be borne by the contractor, together with the re- 
quirement that he shall make good the defective work. 

492. Extension of Time. — An extension of time, equal to the 
time the contractor may be delayed for certain specified causes, is 
often granted. The following are reasons often enumerated, 
though it may rarely be that any one of them will actually happen : 
" Act of God " ; exceptionally inclement weather, suspension by 
order of the engineer pending litigation (threatened or actual) 

266 



ENGINEERING CONTRACT- WRITING §494 

with adjacent owners; delay due to the interference of other con- 
tractors ; or by the construction of duly authorized extras ; strikes 
of workmen, when not caused by the fault or collusion of the con- 
tractor; or if the contractor shall not seasonably receive written 
instructions when he has duly apphed to engineer for them, etc. 

493. Termination of Contract by the Contractor. — Mr. Bam- 
ford (Proc. Am. Soc. C. E., Vol. XXXV, p 1343), remarks that few 
American contracts contain any provision for terminating a con- 
tract under any conditions whatever. In fact, he says, most con- 
tracts are filled with clauses designed to bind the contractor hand 
and foot so that no matter what happens, he is certain to remain 
a party to the contract. He suggests that the great unfairness of 
such provisions can only be accounted for by supposing them to 
be inherited from times when work and conditions were totally 
different from those existing to-day. 

He submits a clause fair to both parties, in which it is provided 
that the contractor may quit upon non-payment by the owner 
of the stipulated amounts when due, after giving notice in writing 
to the owner of said non-payment. The contractor should have 
the same privilege if the owner should become bankrupt, or if the 
work be stopped more than a certain length of time by order of 
the engineer or owner, or by decree of a court of law. In the event 
of any of these contingencies the contractor is entitled (and it 
should be so provided), to recover the full value for all work done 
up to that time, and for all materials furnished on account of that 
work. He is entitled to be compensated for any damages sus- 
tained by him either by purchase of equipment, or otherwise, 
suffered on account of this contract. 

494. Payments. — The manner of payment may be varied in 
many ways to suit the particular circumstances. It is essential 
that the provisions shall enable the contractor to demand and to 
obtain his money as readily as they enable the owner to obtain 
the work for which he pays. 

It is desirable and proper to provide that: ^' Before the . . . 
day of each month, the contractor may submit to the engineer a 
written statement showing (a) the value of the work and materials 
actually wrought into the work up to the first of the month, and 
{b) the value of the materials delivered at the site but not incor- 
porated into the work, deducting the aggregate of previous pay- 
ments." It is then provided that the engineer shall issue a cer- 

267 



§ 495 CONTRACTS 

tificate on or before such a date, and that a certain percentage 
of the money due shall be retained until the amount so retained 
amounts to a certain sum, after which all moneys becoming due 
shall be paid in full. It is also not uncommon to provide that upon 
final adjustment of accounts at completion of the work a certain 
sum is to be retained by the owner for the purpose of making 
good any defects in the work which may develop within a specified 
time, failing which the balance is then paid the contractor. 

495. The idea of retaining percentages until the end of the 

work is intended to insure proper completion. The American 

practice of retaining an unchanging amount throughout is often 

a real hardship on the contractor, and serves no useful purpose 

after the work has been approximately half completed, unless 

special sums are retained to cover known defects. 

In this connection the General Contractors' Association of New York has 
recently suggested the insertion of a clause to the effect that 6% interest 
shall be paid to contractors upon overdue payments, the interest to be com- 
puted from the time money is due until it is paid. This is a reasonable re- 
quest, since it saves the loss of interest on the funds they would otherwise be 
obliged to borrow for running expenses. It also benefits the other party to 
the contract, since a failure to make payments when due does not then con- 
stitute a breach, as it must do if the agreement is to pay unconditionally at a 
fixed date. 

496. Liquidated Damages. — In conjunction with the ex- 
tended discussion given elsewhere (see Appendix Note 9), the 
following clause is offered. It is suggested by Mr. Bamford that 
it may be going as far as is advisable toward obtaining just and 
reasonable damages for delay in completion. Certainly no one 
could object to its fairness. 

" The contractor agrees that the time for the completion of the work 
shall be considered as of the essence of the contract and he agrees that for 
liquidated damages he will pay the owner for the cost of all extra inspection, 
and for all amounts paid for rents (when completed building is to be rented), 
or for more protracted services on the part of the engineer, or other employee 
of the owner kept on the work, and other expenses entailed on the owner 
by reason of the delay in completing the work." 

The owner is then authorized to retain such sums as will 

cover the foregoing damages provided that the maximum so 

claimed shall not exceed a stated amount. If this stated amount 

is exceeded, then the whole matter is to be handled by arbitration, 

and the foregoing is inapplicable.* 

* There is an extensive discussion of Liquidated Damages and Penalties, 
particularly referring to government contracts, by Mr. G. A. King, in Engineer- 
ing Record, Vol. 58, p. 383. He also treats of the bearing of Alterations upon 
the time limit in an illuminating way. The whole article is an able one, and 
well worthy of careful study, 

268 



ENGINEERING CONTRACT- WRITING §498 

EXAMPLE III. Specification Writing 

497. These specifications were prepared by the N. Y. C. & H. 
R. R. R. to cover the contract work in the " Improvement of the 
Grand Central Yard," in New York City, begun about 1903-4. 
As the expenditure involved amounted to several miUion dollars, 
much care and effort was doubtless given to their preparation, 
necessitated by the large variety of things to be done. 

The specification covers about 40 large pages, contains over 
90 clauses, and is indexed for over 200 subjects. As railway 
terminal improvements in large cities are more and more the order 
of the day, and as in each there are some elements in common, a 
study of this specification will prove suggestive and well worth 
while. Accordingly its subjects of most general interest will be 
enumerated, and its framework sketched without particular refer- 
ence to the details. 

Clause 1. Description. States what work the specifications 
are intended to describe, what the contractor is to furnish, and 
enumerates eleven general divisions into which the work is divided, 
as Excavation, Masonry, Sewers, Drains and Ducts, Track, etc. 

2. Describes by title the 25 plans which accompany the con- 
tract, and provides for detail plans to be prepared later, and for 
necessary changes and alterations, all of which are to be equally 
binding upon the contractor. 

3. Uses language which incorporates these specifications with 
the contract, and refers to latter as containing the terms of 
payment. 

4. Character and Quantities of Work. Disclaims responsibility 
for accuracy of borings, and relative quantities of earth and rock, 
requiring the contractor to satisfy himself as to all these matters 
by personal examination. " And no information upon any such 
matters derived from plans, profiles, or specifications, or from the 
engineer or his assistants, shall in any way relieve the contractor 
from all risks incident to this work." 

5. 6, 7. Prohibits the use of ardent spirits; requires the con- 
tractor to provide watchmen and red hghts when necessary, and 
directs him as to final cleaning up of the site. 

8. Requires imperfect work to be made good, even if over- 
looked or accepted by the inspector. 

9. Requires suitable sanitary conveniences for the laborers. 

498. 10. Prohibits advertising on fences or buildings. 

11. Provides that night work shall be performed when re- 
quired, and at same rate as day work. 

269 



§499 CONTRACTS 

12. Is a very long clause dealing with procedure of the work 
and maintenance of existing structures. To be prosecuted at 
such times and places as to promote rapidity of construction con- 
sistent with uninterrupted operation of the railroad, safety to per- 
sons and property, and minimum interference with public travel. 

Surface and sub-surface structures to be maintained in service, 
such as water and gas mains, steam pipes and pneumatic tubes, 
electric subways, sewers, drains, sidewalks, curbs, buildings, etc., 
which in case of injury must be restored to their original condition 
before injury. 

Notice to be given owners of these structures, or to proper city 
officials, one week prior to commencing operations at such places, 
and if alterations in such structures are required, the owners must 
be satisfied. If done by owners, work must be done promptly. 
They must be given full opportunity to do the work themselves. 
No work to be done on any section until a permit is issued author- 
izing contractor to proceed. 

13. Specifies in detail what materials, tools, and labor are to be 
furnished by the railroad. 

14 and 15. Removal of Old Buildings from site. How paid 
for, to whom salvage shall belong, and which buildings are to be 
removed by owners. 

16. Names the classification of Excavation, as Old Masonry, 
SoHd Rock, and Unclassified. 

17. Enumerates more particularly what the scope of the 
excavation is. 

18. Excavation to be so conducted as to give Fire Depart- 
ment access at all times to Fire Hydrants. 

19. States, in general, how deep excavations shall go. 

499. 20. Materials for Masonry found on the site, may be 
used if suitable. 

21. Requires widths and depths of excavations to be com- 
pleted according to the engineer's opinion to permit expediting 
the work. 

22. Covers Shoring and Bracing sides of excavations, and 
pumping when required, explaining what special pumping methods 
may be called for. 

23. Requires blasting to be done with all necessar}^ pre- 
cautions and according to city ordinances. Right to regulate 
explosives used, and storage according to city ordinances. 

24. Explains precautions that may be required in backfilling 
about sewei*s, etc. No frozen earth permitted. 

25. 26, and 27. How excavation is to be measured, and to 
include backfiUing or other disposal, places for which are mentioned. 

28. Outhnes how the excavation work is to be carried forward 

270 



ENGINEERING CONTRACT-WRITING §501 

in co-operation with railroad when material is to be hauled away 
by the company. 

29. Describes what types of roUing stock, and amount of 
same, are to be furnished by contractor, and specifies the charge 
of railroad to contractor for locomotive service. 

500. 30, 31, and 32. Pihng and Timber. Ordinary specifi- 
cation for pihng; to be placed as ordered by engineer. Variety 
and quality of timber in permanent work, and style of workman- 
ship required. General requirements for lumber in temporary 
work. 

33-37. Masonry. Complete specification for Portland cem- 
ent, water, sand, broken stone, and gravel. 

38, 39, and 40. Keeping pits dry ; weepholes in walls ; and use 
of salt in mortar for work in freezing weather. 

501. 41. Mixing and Laying Concrete. Work to be mono- 
hthic. Description of moulds and forms ; coating forms to obtain 
smooth surfaces; final finish of exposed faces, etc. Expansion 
joints in walls, copings, etc. Describes five " Classes " of con- 
crete of varying richness, stating definitely where each class is to 
be used. 

413^. Concrete Paving. Guaranty bond required for main- 
tenance of same for two years. Preparation of subgrade; materials 
for pavement; laying, curbs, cleavage hnes, roughened top surface, 
etc. 

42. Stone Masonry. Gives proportions for Pointing Mortar, 
explains how pointing is to be done, the laying of stone, and its 
quahty. Special requirements for copings and bridge seats, arch 
sheeting, ring stones and quoins, and concludes with ordinary 
specifications for First, Second, and Third Class stone or rubble 
masonry. 

43. Brick Masonry. Quahty of brick, wetting, quahty of 
mortar, and shove joints; to be plastered and waterproofed where 
required. 

44. Sewers. To be according to plans. All general clauses 
of the contract to apply also to sewers. What price is to include. 
Cement mortar to be used ; other sewers and water pipes to be re- 
laid if disturbed. 

Connections with present sewers ; quahty of foundation tim- 
bers ; disposition of material ; length of trench to be opened ; flow 
in intersected sewers to be maintained; quicksand; repaving; 
rock excavation; backfilhng; brick masonry; joints; spurs and 
house connections ; quahty of concrete ; kind of sewer pipes, 
quality, thickness and length of same; are each given a separate 
clause, and greater or less particularity. 

There are also particular directions as to laying, cleaning, and 
inspecting the pipes ; when iron pipes are to be used ; description 

271 



§ 502 CONTRACTS 

of manholes, covers for same ; directions as to change of location 
of receiving basins, culverts, and when concrete sewers may be 
called for, each receiving a paragraph. In all, there are about 
sixty subdivisions of this clause on sewers. 

45. Provides for the drainage of the railroad yard, and regu- 
lates the placing of sub-drains, pumps, and sumps. 

46. Electric Ducts. Describes the quahty of clay products 
intended, and discusses laying, rodding, and inspection. 

47. Water Mains. In sixteen paragraphs covers quahty of 
iron pipe, lengths, weights, and thickness for each size, how cast- 
ings shall be marked, cleaned, coated with specified pitch, tested 
at the foundry, kind of joints required. Requires notices to be 
given in case any water main, hydrant, etc., must be interrupted 
in its flow. 

48. Gas Mains. Materials for pipe; trenching; careful direc- 
tions as to laying, making joints, and amount of lead required for 
caulking ; location of drips, testing mains for leakage (pneumat- 
ically), and backfilHng, — each receives a separate paragraph. 

49. Wrought and Cast Iron. Specifications for all of these 
materials which are to be furnished on W'hole contract. 

502. 50. Reinforcing Bars for Concrete. Type called for, 
and tensile strength specified. 

51. Erection of Structural Steel. Ten paragraphs, telhng 
what items are included in contract price, as unloading, storing, 
painting, and setting of anchor bolts ; giving directions as to re- 
moving old structures, and ownership of the same; stating who 
shall pass upon false work supporting company's tracks, regu- 
lating the conduct of field riveting, methods of erection and the 
procedure upon detecting defective shop work. 

52. Waterproofing. Intent to secure structures permanently 
free from moisture due to percolation of water or other hquids 
from outside, etc. 

53. Materials. Specifies what is meant by " Pitch,'' coal-tar 
pitch, natural asphalt, petroleum pitch; what weight of felt and 
quahty of burlap is required. 

54. Application of Waterproofing. Temperature of tar and 
asphalt, and condition of surface same is placed upon ; requires 
skilled workmen ; protection must be given waterproofing after 
membrane is completed; directions how to lay felt or burlaj), 
break joints, etc. 

55. Leaks in waterproofing developing before completion of 
entire Improvement to be re-treated and stopped. 

56. Waterproofing work is divided into fifteen classes, de- 
pending upon the number of layers of felt or burlap, and upon the 
bituminous material used, whether asphalt, petroleum pitch, or 
coal-tar pitch. (Each class has a different price per scjuare foot.) 

272 



ENGINEERING CONTRACT- WRITING §505 

There is also a long clause explaining the special waterproofing 
features on sohd steel track floor. (As for subway roof beneath 
railroad yard.) 

57. Provides that hollow building-tile shall be placed on par- 
ticularly wet sections of retaining walls, the waterproofing to be 
apphed outside of that. 

58. Pavements and Sidewalks Restored. Required to be 
done when backfills are complete and settled; work to satisfy 
city authorities, etc. 

59. Allows other pavements to be laid if desired and arranged 
for with the proper officials and property owners. Shows how 
contractor's liability is to be terminated, in case other contractors 
are to do new paving. 

503. 60. States what pavements are included under this con- 
tract. 

61. Sidewalk Lights. Arrangement of bull's-eyes, materials 
and mode of construction to be approved; whole to withstand 
load of 350 pounds per square foot, and to be guaranteed against 
excessive wear and leakage for two years. 

62. Track. General requirements as to skill of workmen, 
general foreman, and high quahty of work. Clauses as a whole 
relate to permanent and not temporary track. 

63-4. Track Materials. Loading, handhng, and storing rails 
and track materials, and duty of contractor with reference to loss 
or injury of same. 

65. Direction as to laying rails, location of joints, tightening 
nuts, and requirements for switch points used in making tem- 
porary connections of tracks. 

66 to 71, inclusive. Where second-class rails may be used; 
spacing of ties ; quahty and placing of joint-ties ; ends of ties in 
Hne ; care in handhng ties to prevent bruising with mauls, cutting 
notches, or sticking picks into them ; adzing ; laying heart-side 
down ; and use of wooden plugs when spikes are drawn. 

504. 72-75. Directions as to spiking rails ; drilhng rails ; when 
short and special lengths of rails will be required, or may be used. 

76. Rails on Curves. Gives a table of middle ordinates for 
chord lengths up to 100 feet, for 1 to 29-degree curves. 

77. Expansion at Joints. Requires iron shims in laying 
track, and gives table of thickness for temperatures zero to 100 
degrees F. 

78. Step Joints. Requires step chairs and compromise 
spHces. 

79. Tie Plates. Directions for placing them. 

505. 80. Lining and surfacing track when laying new rail. 
81-2-3. Gauge. To be widened on curves according to given 

273 



§ 506 CONTRACTS 

table; particular care given to gauge at joints; requires use of 
level-board by track men. 

84. Regulates super-elevation of rail on simple, compound, and 
transition curves. 

85. Special precautions for laying switches and frogs. 

86. Ballasting. Contractor's duties relating to same, and 
until acceptance of tracks by a railroad officer. 

87. Signals and Interlocking. Contractor for that work not 
to be interfered with by this contractor. 

88. When concrete road-bed or other special construction 
may be required. 

89. Setting of bumping-posts. 

506. 90-93. Mill Work and Hardware for Station. Size, 
quahty, etc. of doors, door-frames, moulding, window-frames, 
sills, and casings ; pulleys for window-frames, sash-locks, lifts, 
weights, sash-chains, hinges for doors, bolts, locks ; painting and 
glazing both of wood-work and iron grillework are each and all 
appropriately specified. 

Summary. — This specification is divided into groups of 
clauses, so that 

Nos. 1-13 relate to General Provisions. 

14, 15 relate to Removal of Old Buildings. 

16-29 relate to Excavation. 

30-32 relate to Piling and Timber. 

33-43 relate to Masonry. 

44-48 relate to Sewers, Drains, Ducts, and Water and Gas 

Mains. 
49-51 relate to Iron and Steel. 
52-57 relate to Waterproofing. 
58-61 relate to Pavements and Sidewalks. 
62-86 relate to Track. 
90-93 relate to Mill Work and Hardware. 



274 



APPENDIX NOTES 

App. Note 1. (See § 21 Footnote.) Legal Aspects of Modem Technical 

Problems. 

In the engineering field a learned judge has said, " New technical questions 
are arising [such as electrolysis, for instance], and we are without precedents 
in decided cases for our guidance, but as these new questions arise the admin- 
istration of the law should keep step with the new situations arising in the 
march of scientific invention and improvement, not b}' inventing new legal 
principles, but by the expansion of old and well-recognized principles of law 
and equity so as to meet and cover the new situations. It would be a reproach 
to our system of jurisprudence and the administration thereof, if a situation 
could arise in which large and material injury should be done to legal rights and 
destruction caused to property and the law be powerless to apply a remedy." 
App. Note 2. Arbitration Clauses. (§ 33.) 

In connection with this topic of public policy, and its relation to arbitra- 
tion clauses, see the article on Engineers, Contractors and Specifications, by Mr. 
Willis Whited, in Eng. News of November 13, 1902. He makes the follow- 
ing very pertinent remarks: " It is pretty generally held by the courts that no 
provisions in a contract can oust the courts of their jurisdiction. The pro- 
visions making the engineer sole judge of disputed points are held valid, with 
the reservation that the engineer is to exercise his judgment in good faith, 
and not in an arbitrary or oppressive manner. Of course, the burden rests 
upon the contractor to prove that these conditions are not fulfilled. 

"■ Most intelligent jurists recognize the fact that when a man lets a contract 
for a building, for example, he wants a building and not a lawsuit; that ques- 
tions frequently arise which must be decided on the spot b}' somebod}^ if any 
work is to be accomplished; and that they can be far better decided by the 
architect or engineer who is familiar with all the circumstances than by any 
court or jury, especially as they are usually technical questions. Courts 
usually favor settling disputes by arbitration, and if provision for arbitration 
is made in the contract, it will almost always be sustained in the absence of 
fraud, — and the complainant must prove the fraud." 
App. Note 3. (§ 34.) PUBLIC POLICY, in connection with Railroad Passes. 

With reference to matters indifterent to the public, the parties may con- 
tract according to their own pleasure, but they cannot do so when the public 
has an interest in the matter. That is, certain duties are attached by law to 
certain employments, and these cannot be waived nor dispensed with by in- 
dividual contract. In this class is the duty of a carrier to carry passengers 
safely, etc. The boundaries of the domain within which rules of pubHc policy 
will apply are elastic, and this adds to the difficulty of the question. 

In 150 Massachusetts 365 (A. D. 1890) a man asked for a free pass which 
was given him on condition that he released the Railroad Compan}^ which 
he used, thus accepting its terms. It is said that no sound public policy was 
contravened by the Company's stipulating that it should be released from 

275 



Note 4a appendix notes 

liability in this case, since it was doing all it could reasonably be held to do by 
gixing the ride for nothing, — the public had no rights which could be harmed 
by such an agreement, and hence such an agreement was not contrary to pub- 
lic policy. In this case he was not a passenger for hire. 

The United States Supreme Court, in Stevens v. Railroad Company, in 
1877, defines more clearly what a passenger for hire is. Here, Stevens made 
a contract with X, wherein a part of the consideration was that Stevens should 
go to Montreal from Portland, Me., and that X should pa}' all his expenses, 
including of course, his railroad fare. Now X was the Railroad Compan}-, and 
as a fact it gave him a pass in the ordinary form, i.e. with release for the Com- 
pany's negligence, etc. The fact that on the face of matters the pass did not 
cost Stevens anything makes it look like a free pass, but he was held not to be 
a free passenger at all, since the true relation of the parties was as though the 
Railroad Company had handed him the cash with which to buy his ticket. 
Hence the release was invalid, and the Company was liable for negligence. 

In 64 Massachusetts 228, decided in 1852, the proposition is laid down that 
where a laborer was being carried to and from his work on the g^a^•el train, 
he was not in any way a passenger for hire, because in general the laborer 
should get to the work himself. He was within the fellow-servant rule, i.e. 
Company was not liable for injury received through the engine driver's neg- 
ligence by reason of w^hich there was a collision and the laborer (plaintiff) was 
run over. 

The case of a civil engineer working for a railroad would seem to fall 
under the rule of Stevens v. Railroad Company, since it is undoubtedly a part 
of the consideration of his employment that he shall be transported from 
place to place by the Company. It is e^'ident that he couldn't walk. 

App. Note 4- (§ 70.) Implied Contract with a Condition Precedent. 

A passenger entered a railroad car without a ticket and was later ap- 
proached by the conductor and asked for it. This may be considered to be an 
offer to contract made by the agent of the railroad -company, but as no express 
language was used to that effect, the contract must be an implied one. This 
implied contract is to the effect that if the fare is paid then the company will 
carry the passenger, and forthwith assume the liabilities of a carrier of per- 
sons. But the payment of fare is a condition precedent to the company's 
entering into the contract of carriage. If the payment is refused then there 
is no contract even if the passenger subsequently offers the money, since the 
company is not bound to accept performance after breach of the condition 
precedent by the passenger. This is because the offer made by the conductor 
was refused ; hence there was then no outstanding offer to contract. 

This case arose because a person who refused to pay fare was put off the 
train with'some force (after it had been stopped for that purpose), and this, he 
claimed, was a breach of his contract of carriage. The reasoning given above 
was that of the highest court of Massachusetts, and shows clearly why there 
never was a contract of carriage made, and why, therefore, there was no breach 
of it by the Company. (16 Gray 20.) 

App. Note 4A. (§ 72,) Implied Condition Precedent. 

Where a building-sui)erintentlent or ongiiioer is to certify upon the 

276 



APPENDIX NOTES Note 5 

quality of the work before it is to be paid for, yet the contractor may recover 
for work done by showing: 

( 1) That the certificate is withheld through fraud or bad faith on the part 
of the engineer; or 

(2) Through collusion between defendant and engineer; or 

(3) Through a manifest mistake made by the engineer. (138 U. S. 183, 
51 N. J. Law, 1, etc.) 

This well illustrates a condition within a condition, the first of which may 
be either express or implied (generally express), and the second one is a con- 
dition " implied in fact," since it is a necessary implication from the express 
one. Even the second condition must be absolutely performed. (6 Gray 
402.) 

Pursuing this point, the student should notice that granting the certificate 
of quality by the engineer is usually an express condition precedent to the con- 
tractor's receiving pay. To this, by the terms of the contract, the parties 
fairly agree; but the contractor cannot be supposed to agree that he will allow 
the engineer to cheat and defraud him at his pleasure, nor that he agrees to 
accept without question any statement made by the engineer, which is founded 
upon a manifest mistake, and known to be so by the contractor. Therefore, 
these are iiecessary implications on the express terms used, and their importance 
should not be underestimated, 

App. Note 5. (§ 73.) Time Element as a Condition Precedent. 

Where the circumstances are such that for some reason the time element 
in a contract is of extreme importance, the parties may by appropriate lan- 
guage make" time of the essence," meaning that noncompliance with the time 
provisions is a substantial breach and discharges the contract, if the party in- 
jured so elects. Failing a complete discharge, still the injured party is en- 
titled to damages if the contractor (without fault of the owner), fails to com- 
plete the work on time. And when a contract requires completion at a specified 
time, the question of the contractor's negligence or diligence is not considered; 
nor do strikes, lockouts, accidents, delays in carriage, etc., relieve him unless 
there is a particular provision to that effect. The point is that the contractor 
agrees absolutely to complete at the time named. He should have contracted 
in contemplation of the contingencies that might arise ; failing to do this he is 
bound by the terms assented to, as already alluded to under " Impossibility of 
Performance." Probably if the work is destroyed by " Act of God," per- 
formance on time would be excused. 

The converse of the above proposition deals with failure to complete on 
time by reason of the wrongful acts (or neglect to act) on the owner's part. 
Thus it is obvious that an owner cannot forbid a contractor to proceed, and 
then sue him because he did not proceed and finish on time. The contractor 
should also be excused from the time-limit if the owner was so occupying the 
site as to prevent him from setting up his plant thereon at the agreed time. 
Other instances might be where the owner had failed to obtain a building per- 
mit, to furnish lines and grades when same were called for by the contract, 
etc., etc. All of these, it will be seen, are true conditions precedent to the 
owner's right to sue for breach by non-completion on time. The same remarks 

277 



Note 6 APPENDIX NOTES 

apply where the engineer, as the owner's agent, makes mistakes requiring the 
work to be done a second time, or fails to give the lines at proper times, etc. , etc. 

App. Note 6. (§ 80.) Statutory Regulations Encountered in Performance. 

It is not uncommon to place upon the contractor the burden of keeping 
fully informed upon existing State, municipal, or national laws and ordinances 
in effect or made during the continuance of the work, and affecting the men or 
materials employed. (See clause in Charles River Dam Example.) Since it 
may happen that these requirements are very divergent and even contra- 
dictory in different places, often the local interpretation of purely local or- 
dinances is extremely difficult to be come at. Hence there may be great hard- 
ship to the contractor when the specification writer, by a blanket clause, avoids 
the personal responsibility of writing the specification in accordance with 
existing laws or ordinances such as building and other regulations relating to 
the preservation of the public health and safety, and thus puts the onus of his 
negligence or his ignorance where it does not justly belong. 

Mr. Bamford (Proc. Am. Soc. C. E., XXXV, 1330), cites with commenda- 
tion the English scheme, noteworthy for its fairness: If the local authorities 
require the work to be done in a different manner from that called for in the 
specifications, and that work requires additional expense, it is only fair that 
the owner and not the contractor shall pay the same. Mr. Bamford (copying 
from the English standard form) suggests this language, in part: " Before 
making any variations * * that may be necessary to so conform, the con- 
tractor shall give the engineer written notice, specifying the variation proposed 
to be made, and the reason for making it, and apply for instructions therein. 
If instructions are not given, he shall proceed in conformity with the ordinance 
or regulation, and the question of extras shall be determined under the general 
clause for arbitration of all differences." " All contract requirements over, 
above, and beyond said ordinances shall be fully complied with." 

App. Note 7. (§ 123.) Breach by Abandonment. 

If a contractor without just cause abandons the work before completion, 
he cannot recover anything for what he may have done up to that time ; and 
even if the owner uses the incomplete work for his own benefit it is not cer- 
tain that he will have to pay anything for it, since as it is located on his prem- 
ises, if he does not use it he may thus be deprived of the use of his own land, 
and he should not be obliged to tear down and remove the new work, nor yet 
abandon his own land. (171 Pa. 46.) (See Substantial Performance.) 

This application of principles may seem harsh, but it results from reason 
and logic. As the right of compensation would arise only when performance 
was complete, the contractor has merely delivered materials upon the land 
of another without entitling himself to be paid therefor, and the owTier suffers 
the same to remain there, but should not be obliged to go to the expense of 
removing them. A corollary to this would be that the contractor should have 
the right to remove the materials again. 

But in this connection, it should be observed that if the breach is made hv 
the owner, and the contractor is thereby prevented from performing (either be- 
cause the owner refuses to allow him to do so, or because the owner omits to 
perform some highly essential j.art, — perhaps a i^re requisite) then the con- 

278 



APPENDIX NOTES T^Ote 9 

tractor may recover for the value of the work he has done, and also his damages 
sustained by reason of the owner's breach. The natural measure of damages 
would be the profit the contractor would have made on the job. 

App. Note 8. (§131.) Indirect Damages. 

The principles of damages* apply equally well whether the action for 
damages arises by reason of a breach of contract, or by reason of a tort suffered 
by the plaintiff. It should be noted, however, that there is a modification to 
the broad rule given, and that under certain circumstances, an action " on 
the case," as lawyers term it, may be successfully had where the damages are 
indirect. It seems this remedy can but rarely be availed of, however, be- 
cause of the difficulty in determining, as a practical matter, just what the 
damages have been. 

This is a point of some interest to engineers, since the legislation in New 
York pertaining to the acquisition of an additional water-supply, and also that 
in Massachusetts creating the Metropolitan Water Board, has dealt somewhat 
with this matter, and recognized that there are cases where indirect damages 
should be allowed. 

In Vol. 51 of Eng. Record No. 20, there is an editorial in which it is 
pointed out that where (for example) a manufacturing plant must be moved 
because of the occupation of its site by a new reservoir, this question of in- 
direct damages might fairly arise. The manufacturer would naturally claim 
that it was a disadvantage to him to be moved, and for the moving he would 
undoubtedly be made whole. Then he would claim that there was a further 
indirect damage to him by reason of his being obliged to do business at the 
new place. A jury might find, however, that it was in fact more advantageous 
to him to have to do business at the new place instead of at the old location. 
If the equitable maxim " He who seeks equity must do equity," were now to 
be applied, should not the manufacturer be obliged to pay for the benefit 
which he has received ? There is now no evidence perhaps that this last step 
has or will be taken, but the argument serves to show the difficulty of proving 
the amount of indirect damages, and it is said that in suits brought under cir- 
cumstances of this sort the awards made on claims for indirect damages have 
been disappointingly small, for the reasons just given. 

App. Note 9. (§ 131.) LIQUIDATED DAMAGES. 

It has been previously hinted that contract provisions bearing upon 
liquidated damages would need careful scrutiny because they impinge upon 
.that important contract essential, viz. : An enforceable contract must not be 
contrary to public policy. 

The element of public policy here raised is to the effect that every one 
has a personal right to have his grievances heard in a court of justice. The 
constitutional and historical background of this proposition cannot be entered 
upon here. Suffice it to say that it has been regarded as a fundamental 
maxim of Anglo-Saxon jurisprudence since the day of Magna Charta. There- 
fore with a view to extending the protecting mantle of the law over those not 
wholly competent to safeguard their own interests, the courts have alwavs 
refused to enforce certain kinds of agreements, on the ground that a person 

*See§§ 130,157. 

279 



IVOte 10 APPENDIX NOTES 

could not contract away his legal right to be heard in court. It vdW not be 
unjust to say, therefore, that contract provisions as to liquidated damages 
are regarded as falling within this class, and are contemplated by the courts 
with something akin to professional bias or prej udice. 

There is a great difference, however, between the power of the parties 
to bind themselves to pay bonuses for completion ahead of time, and the con- 
trary proposition, to enforce the payment of large sums as penalties for failing 
to complete at such specified time. As previously shown under " Considera- 
tion," stipulations as to bonuses for early completion will not be inquired into, 
since it is no concern of the Court to find out whether or not it was really worth 
the bonus to have the thing done so early ; the parties themselves are the best 
judges as to that. But the tendency to oust their jurisdiction involved in 
avowed penalties is a matter the courts have consistently frowned upon. 

Even where such penalties are expressly stipulated for, and every effort 
is made by the parties to have them construed as essential parts of the contract, 
yet under such an agreement the injured party can recover only the actual 
damages received by himself. As already noted, about the only situations 
where liquidated damages expressed in the contract will be allowed is where 
for special reasons it is practically impossible for the Court, or a jur}', to 
ascertain the actual damages. It may well be expected, therefore, that the 
courts will disregard the actual language used, and will inquire as to the spirit 
underlying it. But irrespective of the language, it will often be verj' difficult 
for the Court to decide whether in a given case liquidated damages are called 
for which can be allowed, or whether there is a penalty demanded wliich 
can not be allowed. 

CONTRA. — There is another situation, however, in which liquidated 
damages figure, and which the student and the engineer 
should clearly discern. Suppose that the contract makes no mention of 
penalties or damages, liquidated or otherwise, and breach of some sort or 
abandonment has occurred. It is a well settled policy that " The law favors 
compromises," — hence if now the parties get together and liquidate, i.e. 
ascertain and agree upon their damages, such an agreement can be enforced. 
It will be observed that in effect here is a new contract which either in terms 
or by implication abrogates and discharges the original contract. And as 
the second contract is of a sort which the spirit of the law plainly favors, the 
suspicion of " ousting the Court's jurisdiction " is entirely removed. 

App. Note 10. (§ 168.) Electrolysis. 

The view of the courts upon electrolysis may be seen in Eng. News 
January 3, 1901, where a Gas Company is suing a Street Railway Com- 
pany for electrolytic damage to its mains. The Court says: " The defendant 
can, by the use of appro\ed appliances at a reasonable expense, so o|>orate its 
cars as to avoid injuring the plaintiff's pipes. But the plaintiff cannot b}^ 
any known method j)rotect its pipes from injury." 

" The plaintiff owns its pipe line laid in the street by legal authority. 
The Street Railway Company seizes upon this property and makes use of the 
pipes as a conductor for its return current, and in so doing greatly injures and 
in some instances wholly destroys them, and this is done under a claim that 

280 



APPENDIX NOTES Note 12 

it is performing a public service under authority of law. Is not this a taking 
of private property for public use, and for which just compensation must be 
made ? * * * * " 

" The city could not and did not grant a monopoly of the street to the 
defendant, and when the tracks, poles and wires were placed in the street the 
Railway Company knew that gas and water pipes might be laid in the street 
at any time, and it acquired its rights to run an electric road subject to that 
fact and all the consequences that might follow. The plaintiff is not a tres- 
passer, but occupies the street lawfully , and while there its property is taken 
by the Railway Company as a consequence of its operations. 42 Fed. Rep. 
279." 

" Where a person is making a lawful use of his own property, or of a 
public franchise in such a manner as to occasion injury to another, the question 
of his liability will depend upon whether he has made use of the means which, 
in the progress of science and improvement, have been shown to be best." 

" A street railway company is not, however, bound to adopt the latest 
invention, nor to adopt any before its utility and practicability have been 
demonstrated by use. But * * * when at reasonable expense, by the 
adoption of well known and approved appliances, the injury could be avoided, 
and the person injured is powerless to guard against or prevent such injury, 
then it must be held to be negligence in the use of its franchise on the part of 
such corporation not to adopt such appliances." (See also App. Note 1.) 

App. Note 11. (§ 190.) Appropriation of Municipal Water Supply. 

The Supreme Court of Georgia (49 S. E. Rep. 779) has settled for that juris- 
diction, at least, the following: First, a municipality that buys a piece of 
land upon a non-navigable stream several miles distant from its corporate 
limits does not thereby become a riparian owner sufficiently to become en- 
titled to take water therefrom for its city water supply. Second, that the 
right of a bona fide riparian owner to have the water come to him in its usual 
and natural flow and condition is a right inseparably connected with his land, 
and to deprive him of it without due process of law is confiscation. Third, 
equity will enjoin such a taking by the municipality in derogation of the 
riparian owner's right, even though he may not be at once seriously injured 
by it. 

App. Note 12. (§ 210.) Lateral Support and Negligence. 

Since the owner of land has the absolute right to have his land remain in 
its natural condition, if his neighbor digs so as to injure this right, the first 
has an action against the second without proof of negligence. But the dam- 
ages are limited to injury to land, and do not include any injury to buildings 
or improvements. This is because no one can enlarge his neighbor's liability 
by reason of an interference with this right. If a man is not content to 
enjoy his land in its natural condition but wishes to build upon it, he must 
either make an agreement with his neighbor, or else carry his foundations so 
deep or take such other precautions as to insure the stability of his buildings 
or improvements whatever excavations his neighbor may afterwards make 
in the exercise of his own right. * * * No easement of lateral support can be 
acquired because the next owner (of the servient [?] estate), cannot see, use, 

281 



Note 13 APPENDIX NOTES 

or know of that use and support; hence he cannot acquiesce in it, and hence 
there can be no prescription. (122 Mass. 199.) 

App. Note 13. (§ 268.) Construing Partnership Articles. 

The partnership relation is one of contract, primarily, and the partners 
may by agreement define their various rights, relations, and interests in the 
partnership. If they jail to make specific provision for any case that may 
arise, the following rules of construction will apply. 

(1) All partners are entitled to share equally in the capital and profits, 
and they must contribute equally to meet the losses. 

(2) The firm must reimburse e\'ery partner for payments made out of his 
own personal property, for matters in the ordinary and proper conduct of the 
business, or in reference to matters done and necessary for the preservation of 
the property or interests of the firm. 

(3) Every partner may take part in the management of the partnership 
business. 

(4) No partner is entitled to remuneration for acting in the partnership 
business. His compensation lies in being entitled to a share in the profits 
when they shall have been ascertained. 

(5) No new person shall be introduced into the firm without consent of 
the rest of the partners. 

(6) Partners are bound to render true accounts and full information 
upon all things affecting the partnership business to any other partner, or to 
his legal representatives, as his executor, or administrator. 

App. Note H. (§274.) Final Accomiting. 

Solvent partners may voluntarily close up their business, settle their 
accounts, and divide their surplus. Where the firm is insolvent or the partners 
cannot agree, or conflicting claims arise, the intervention of a court of equity 
will be necessary. The method of accounting may be outlined as follows: 

(1) Ascertain how the firm stands toward all outsiders. 

(2) Ascertain the extent of the obligation as between each partner and 
the firm, including (a) what each has contributed, either as capital or advances ; 
(6) what each should have brought in, but has not; (c) what each has taken out 
more than the others. 

(3) Apportion the profits to be divided, or the losses to be made up, and 
ascertain what each has to pay to the others so as to settle cross-claims. 

When the accounting is complete, the assets are distributed in the following 
order: 

First: In paying the debts due from the firm to third persons. 

Second: In repaying to each partner his advances. 

Third: In repaying to each partner his capital. 

Fourth: The balance will be distributed equally as profits, unless there is 
an agreement that the proportions shall be different. (Lindley on Partner- 
ship, 402.) 

App. Note 15. SURETYSHIP. 

There is a distinct body of contract law relating to Suretyship, as there is 
in Sales, Partnership, etc. It is the present purpose to outline a few of its 
salient principles. 

282 



APPENDIX NOTES Note 15 

Suretyship Defined : " Suretyship is the obhgation of one party to answer 
for the debt, default, or miscarriage of another." (Bouvier's Law Diet.) To 
constitute the status of suretyship, three essential elements must be found: 

(a) There must be three parties, a creditor, a principal debtor, and a 
surety. 

(6) There must be two obligations running to the creditor's benefit, — one 
from the principal debtor, and one from the surety. 

(c) As between the principal debtor and surety, the former must be the 
person ultimately liable. 

In contradistinction to suretyship is a contract for indemnity, where 
the obligation is given by X to protect the indemnitee (S) against his liability 
to another (C, the creditor), whereas by suretyship S guarantees the discharge 
of X's liability to C. Indemnity is well illustrated by ordinary casualty 
insurance, where, for instance, an employer is insured against liability to his 
employees for personal injury, etc. 

Alteration of Contract, or Changes Affecting the Risk. — As already treated 
at some length (see § 32) alterations in the contract may materially modify 
the surety's relation to the whole transaction. There are, therefore, two cases 
presented: (a) Where the original agreement between the principal and 
creditor has been altered, either physically on the face of the written instru- 
ment, or they have by a collateral contract either rescinded or modified all or 
a part of the original agreement. When these acts have taken place without 
the surety's consent or ratification, he plainly cannot be held in a suit upon the 
altered contract, since his rational^defence is that he never made such a contract. 

(b) Where though the original contract remains unchanged, its per- 
formance as between the creditor and the principal debtor is not in precise 
accordance with its terms; or where the principal and creditor have, in the 
course of performance brought about a condition of affairs not fairly to have 
been expected by the surety. Here, the principal question is held to be 
whether the surety's risk has been unfairly increased by actions of the prin- 
cipal and debtor outside the contract. If this condition is found, the resulting 
situation is that of a case where an attempt has been made to bind a third 
person. (See § 31.) In such a case (131 Mass. 77) the Court said: " If such 
change amounts to a substitution of a new agreement for the old, so as to dis- 
charge and put an end to the latter, the surety is discharged. But if the 
change is from its very nature beneficial to the surety, or it is self-evident that 
it cannot prejudice him, the surety is not discharged." The weight of au- 
thority is against this view however. 

Relation to Specifications. — In cases on building contracts where changes 
are made during progress of the work, the question of whether the surety was 
released or not has frequently been held to depend upon the proper interpre- 
tation of the surety's contract. If such interpretation properly makes the 
specifications a part of his contract, then of course alteration of them effects 
his release; otherwise not, unless there are special circumstances which vary 
the risk and raise an equity in his favor. (186 U. S. 309, and 8 Wall. 13.) 

Fraud, Misrepresentation, etc. — We have previously seen the fatal effects 
of fraud upon contracts generally. Its importance in contracts of surety is 
no less. The general trend of the cases is that if the creditor and debtor deal 

283 



Note 16 APPENDIX NOTES 

in any way unfairly, with a resulting increased burden upon surety, he will be 
discharged. Equally pertinent is the rule that if any unfair dealing is prac- 
ti>ed directly upon the surety by the creditor, the contract of surety is in- 
effectual. A distinction is made, however, between cases where the creditor 
actually misrepresents jacts. and those where he says certain things will come 
to pass. For if such statements are merely of his expectation, failure to make 
them good will not discharge the surety. But if on the other hand they are 
essentially promises, a breach of them will work the surety's discharge on the 
ground of failure of consideration, or breach of an implied or express con- 
dition precedent. 

Indemnity. — The student should note carefully that with reference to 
engineering contracts, the whole matter of suretyship does not in any way 
decrease the responsibilities and burdens of the contractor. It is merely a de- 
vice for strengthening the contractor's credit for the benefit of the owner, or 
the contractor's employer. 

In fact it is common for the contractor to enter into an express contract 
of indemnity w4th his surety, that in the event of the surety's having to pay, 
the contractor will later make him whole. But in the absence of such a con- 
tract, nevertheless the surety can hold the contractor upon an implied con- 
tract of indemnity, if the surety has to pay the whole or any part of the con- 
tractor's debt, or default, etc. 

From the foregoing principles, important rules of the law of suretyship 
spring. Thus, if a surety pays, he succeeds to the rights of the creditor whom 
he has discharged, and may prosecute the original obligation against the 
debtor in the creditor's name. This is called the right of subrogation. If the 
debtor has been obliged to hypothecate other securities by putting them into 
the hands of the creditor, the surety, upon paying, succeeds to the possession 
of such securities, and holds them in his own behalf. Again, if the debtor 
has assets which he refuses to apply to his debt, the surety can, in a proper 
case, come into a court of equity and compel his principal to pay the debt 
before the creditor collects from the surety. If successful in this, of course the 
surety is exonerated from payment of the debt. 

Discharge of Surety. — In general it may be said that if the debtor is dis- 
charged otherwise than by an act of the creditor (as bankruptcy, death, etc.), 
the surety is not discharged. But any act of the creditor which results in the 
complete or partial discharge of the debtor results in discharging the surety 
to the same extent. 

App. Note 16. (§425.) Types of Engineering Contracts. 

The common law essentials must be observed in forming any contract if 
it is to have binding effect. That is not saying, however, that the provisions 
of contracts framed to secure substantially the same results may not be ^•a^ied 
so as to require grouping as different types. This is particularly true of engi- 
neering contracts, and the prominent features of three typ)es will be outlinetl 
here. The engineering contractor classifies them according to the mode of 
letting, or awarding the contract, since each type differing in this respect 
carries also its own special characteristics. 

Mr. Frank B. Gilbreth, a prominent and widely exjKirienced contractor, 

284 



APPENDIX NOTES Note 16 

writing in Engineering News, October 18, 1906, describes in a masterly fashion 
the sahent features of (a) " Lump-Sum," (6) " Percentage," and (c) " Cost- 
Phis-a-Fixed-Sum " contracts. He analyzes each upon four points: 

(1) Lowest total cost to the owner. 

(2) Greatest speed of construction, 

(3) Best workmanship, 

(4) Future business between owner and contractor, based upon past 
experience. 

(a) Under the '' LUMP-SUM " contract the contractor agrees to furnish 
all labor and materials necessary to complete a certain definite piece of work, 
(plans, specifications, and details of which must be complete), for a definite 
lump-sum (or at unit-prices). 

While at first glance this appears to be a very reasonable, harmless and 
peaceful sort of a contract, it is in fact often anything but that. Difficulties 
arise when the owner changes his mind, or the engineer changes his plans, and 
the opportunity arises for the contractor to charge for " extras," — often 
a thing he has been earnestly hoping for. From now on the essence of the 
lump-sum theory is violated, for there is now added the contingencies of costs 
for extras, time extensions, and lawyer's fees. 

As the interests of the owner and of the contractor are opposed finan- 
cially, the above loop-holes, and many others practically unavoidable in a 
lump-sum contract will ordinarily be taken advantage of by the contractor, 
since the money he can save he is saving for himself. 

" What does the owner pay for under this form of contract?" The first 
premise is that the contractor will not work without a profit. Furthermore, 
he is taking the risk of unfavorable circumstances; he therefore adds a good 
stiff percentage so that he may be sure of his profit, whatever happens. If the 
possible extra hazard does not materialize, then the contractor has made two 
profits, if he has previously allowed for a reasonable profit supposing that he 
wiU do the work under ordinary conditions. But specially favorable circum- 
stances are as likely to arise, on the average, as often as the unfavorable ones 
first contemplated, and in such a case the contractor will have made three 
profits. 

Another disadvantage is that the owner cannot hold the contractor to the 
speed requirements, nor to the date of completion in case he has ordered extra 
work. (See " Effect of Alterations " § § 32, 109.) 

(6) In the " PERCENTAGE " contract, the contractor agrees to furnish 
all materials and labor necessary to complete the entire undertaking for cost, 
plus an agreed percentage of the said cost. This would seem to be a very 
desirable arrangement. " Nearly perfect, — but not quite," says Mr, Gilbreth. 
The owner can regulate the time of completion, the class of labor he will em- 
ploy, the modes of execution, quality of materials, etc. The interests of the 
owner and contractor are identical, so far as speed of construction and the 
desire to obtain good work are concerned, and the chances for continued 
pleasant relations are good, if it were not for the fact that the owner is apt to 
suspect that the contractor may be increasing the cost for the sake of getting 
more profit, since that is directly proportional to the cost of the whole under- 
taking. 

285 



Note 16 APPENDIX NOTES 

(c) To remove the above temptation from the path of the contractor, the 
" COST-PLUS-A-FIXED-SUM " contract was devised. It possesses all the ad- 
vantages of the " percentage " contract, and the only discoverable disadvan- 
tage is that the owner cannot possibly get his undertaking completed for less 
than cost, as might happen under the " lump-sum " contract, — supposing 
the contractor had made an error in his bid, and had not had an oppor- 
tunity to recoup himself on " extras." 

Under a scheme of profits equal to a predetermined sum, the interests 
of both parties are identical, since the owner knows in advance just what 
the contractor will make, and as the contractor's profits or salary- are assured, 
it is for his interest to perform the work in such a manner as to retain the 
owner's patronage. This means that he will honestly endeavor to perform 
the work in the shortest possible time, with the best possible workmanship, 
and for the least cost. And the money which his skill and enterprise can save 
inures to the benefit of the owner, who is, moreover, relieved of the menace 
of " extras " done at excessive costs. The owner may change his plans at 
will, he may purchase his own materials if he so desires, or he may require that 
proposals to buy shall be submitted to him in advance of ordering the materials. 
He may complete his excavations and foundations while plans for the super- 
structure are being drawn, and can have any number of skilled or carefully 
trained mechanics massed on the work as his own judgment or initiative in- 
dicates. Many other advantages will accrue to him which it is not necessary 
to enumerate here. 

From the contractor's standpoint, the advantages are not less significant 
and important. He now has an opportunity to win high business prestige 
solely upon his merits. His profits wull be assured. He will be free from 
relations with owners who have not the courage to take legitimate risks in 
conjunction with their undertakings, and who wish to saddle them upon a con- 
tractor on a lump-sum basis, and leave him to gamble his way out as best he 
can. And last, but not least, the contractor has the satisfaction of dealing 
with an owner who has no reason to suspect him of overreaching, who is not in 
constant dread of extortionate charges for extra work, and who is in fact a 
party to a contract offering him complete financial insight into the job. 

Mr. Gilbreth intimates that contractors are not wanting who, like wolves, 
are willing to masquerade in sheep's clothing, if the}' may thus ensnare the 
unwary. He points out that this is the effect of the " Cost-Plus-a-Fixed- 
Sum-and-Guaranteed-Maximum " contract. At first glance such a contract 
appears to have the advantage of the first and third types herein discussed, 
but this is fallacious. In fact, he says, they are nothing more than lump-- 
sum contracts (if they have a guaranteed maximum cost), and the " fixed " 
sum is fixed only in case the maximum is not reached. 

The entire theory of the " cost-plus-a-fixed-sum " type is that the owner 
shall have complete control and his own way in any and all matters pertaining 
to his work. And it is obviously ridiculous and absurd, under these con- 
ditions, to expect a contractor to guarantee any maximum cost. But in order 
to get satisfactory' results from a cost-plus-a-fixed-sum contract, it must be 
clearly understood that the owner is to pay all the cost and that the entire 
fixed sum is to be net profit to the contractor. 

Mr, Gilbreth's final comment upon this typ)e of contract is worthy of 

286 



APPENDIX NOTES Note 18 

serious consideration from engineers who let contracts, and would like to see 
the business of engineering contracting raised from a plane of sordid gambling 
to a more enlightened and equitable one befitting its importance to the 
engineering profession. He says, " The cost-plus-a-fixed-sum contract has 
proved, time and again, that the same amount of effort, thought, and money- 
required to win lawsuits, can be better spent to reduce the costs and the time 
of completion, and in securing better workmanship," 

In writing the above, Mr. Gilbreth probably had agreements for the 
construction of buildings largely in mind. The student should not jump to 
the conclusion that this form of contract is universally adaptable to all classes 
of construction work, nor that it will probably ever wholly supersede the 
lump-sum contract. It is submitted that a wider adoption of it would lessen 
litigation and raise the general business level of contracting. 

App. Note 17. (§ 397.) Objects of Specifications. 

Mr. J. H. Bacon, in a paper before the American Society of Engineering 
Contractors, January 10, 1910, discussing the purpose in specification writing, 
observes that there are two main objects common to all specifications: (1) 
To define the work to be done so that any competent contractor may sub- 
mit an intelligent bid. (2) To establish a guide and a standard by which the 
contract may be interpreted with fairness to each party. 

To obtain the second result three cardinal principles should be observed: 

(a) The schedule of prices should include every item that can possibly be 
foreseen with a view to reducing " force account " work and " extra items " to 
a minimurii. This will prevent either party from claiming or denying without 
justification that any piece of work is covered by the specification. 

(6) Every item in the schedule of prices should be adequately covered by 
a corresponding clause or section in the specifications. 

(c) The specifications should be so worded as to reduce to a minimum the 
possibility of difference of opinion as to which clause of the specifications will 
cover any given item in the schedule of prices. 

With these principles in view, the expression, " In the opinion of the 
engineer," or its equivalent, should be excluded as far as possible. The price 
to be paid should be connected with the work to be done by concise and clear 
language. The contractor should have no excuse for insuring himself against 
loss by bidding higher prices than the actual work justifies. 

Difficulty of the Task. — It is demonstrable that specification writing is 
worthy to rank high among other more showy, but scarcely more interesting 
professional work. Indeed it requires for its satisfactory accomplishment a 
high degree of technical knowledge, more than a smattering of legal informa- 
tion, and a sound commercial training. If in addition, the writer is possessed 
of sound common sense, allied to practical experience in his work, he will be 
well fitted to assist in dispelling the much too popular fallacy that the prep- 
aration of engineering specifications is a necessary but uninteresting piece 
of drudgery, carrying with it no reward but that which always accompanies 
work well done. (H. L. Butler, in Engineering-Contracting, February 3, 1909.) 

App. Note 18. TRUE ECONOMY IN GOOD SPECIFICATIONS. 

In Engineering News, September 18, 1902, there is a strong editorial 

287 



Note 18 APPENDIX NOTES 

containing pertinent criticism of current practice in specification writing, some 
of which is well worth quoting. A valued correspondent with long experi- 
ence in engineering work submitted a definition, suggested by numerous 
specifications in current use. It was: "A specification is an instrument or 
document purposed to set the contractor guessing at the engineer's meaning." 
And, it is asked, if this indictment is true, why do engineers write such speci- 
fications ? 

The reason, it is urged, is easily seen. The engineer writes his specifi- 
cations to fit, — not the honest contractor who aims to do good work, and 
has a reputation to that effect, but to fit the dishonest and crooked con- 
tractor who will scamp his work at every turn. The engineer knows that he 
may be obliged to let the work to a man of the latter class, and wishes to 
secure all possible hold upon him. Therefore, if the specification leaves the 
engineer unlimited discretion as to accepting the work, he feels that he can 
better control the sharp contractor who seeks to take unfair advantage of 
every loop-hole. This is the engineer's view of the case. 

Looking from the honest contractor's standpoint, it is evident that even 
with the most complete and definite specifications he must, in most engineer- 
ing work, take a large amount of risk. When the specifications are incom- 
plete and indefinite, and the engineer's " judgment " is a prime element, the 
contractor must often reckon on it as being almost the largest element of 
risk involved. 

If we candidly consider the question, " Is it not a mistake to place any 
unnecessary risk upon the contractor ? " it is self-evident that every such 
added risk means that a bidder who is financially responsible must add enough 
to his bid to cover that risk. The irresponsible bidder has httle to lose, and 
the result is that too often he submits the lowest bid. If he is lucky he makes 
a profit ; but if luck goes the other way the contract will probably be abandoned, 
and there will be the expense and delay attendant upon re-letting the work. 

Nor is this the sum total of the evils attending poor specifications. From 
time immemorial manipulation of the specifications has been a favorite scheme 
of corruption in contract work. If specifications, the most severe that wit 
can devise are made, they can be defended as necessary requirements of the 
work. But the contractor " on the inside," is aware that they will not be 
enforced, since he knows what his competitors do not know, — the " personal 
equation " of the engineer. 

Considering all these matters, is it not fair to judge a specification by the 
extent to which it makes definite and clear the work to be done, ^^'hen this 
result is accomplished, the contractor can estimate with certainty what finan- 
cial obligations he must assume, and need not add on for imcertainties of 
meaning. 

This editorial analyzes the contractor's status in the specification of an 
important United States Government contract, laying especial stress on a 
blanket clause covering " Omissions and Misdescriptions." It points out the 
danger lurking in clauses pertaining to " Control of Work," and " Progress of 
Work " is commented upon, all of which may be read to advantage by the 
student or engineer. It is shown that "hair-splitting requirements" in 
specifications are factors wherein the " personal e(iuation " of the engineer 
enters prominently and affects the price which the contractor must bid. More- 

288 



APPENDIX NOTES Note 20 

over, many of these exquisite refinements are so technical or highly theoreti- 
cal as to be impracticable of execution. 

If important points in the work are necessarily uncertain and subject to 
numerous variations, it is sometimes argued that " blanket clauses " are the 
only way of meeting the difficulties. In rebuttal it is urged that the only 
logical way of dealing with such situations is to do the work by day-labor. 

App. Note 19. (§ 400.) "Political Contracts" and "Trouble Breeders." 

Editorial writers have long pointed out that in municipal work as else- 
where, specifications are frequently so drawn as to place all burden of doubt 
on the contractor. This necessarily breeds a class of contractors who are not 
primarily business men so much as they are gamblers, or they may be purely 
politicians who rely upon their " pull " to save them from financial loss in case 
the conditions prove worse than anticipated. 

It is apparent that a clear, complete, and fair specification, if universally 
used on municipal contract work, would soon eliminate such gamblers and 
pohticians, for as a rule they do not have the business ability to successfully 
compete with the modern contractor. 

Three items, known as breeders of trouble, may well be mentioned here. 
It is said that the great majority of lawsuits brought by contractors arise (1) 
over excavation, or (2) over changes in construction necessitated by the dis- 
covery of unexpected conditions when the excavation was made. 

The third relates to the power or authority of the engineer on the work. 
Recently the General Contractors' Association, of New York City, has asked 
that in all future contracts for city work, the provision that the decision of 
the Chief Engineer shall be final and binding in settlement of all disputes, 
measurements of quantities, and interpretations of specifications, be strongly 
modified, since they assert (probably with reason), that such provisions have 
been the subject of endless discussion, friction and litigation. 

App. Note 20. Bibliography of Specifications. 

The following list of current specifications makes no claims for complete- 
ness. It is given in the hope that from some of its references the practicing 
engineer may get assistance in a given problem which confronts him. The 
list, therefore, has been chosen with a view to its accessibility to the engineer- 
ing profession, — probably each specification can be obtained by application 
to the Company named. The number following the name of the subject is a 
part of the title, and should be so used. 

For convenience, the specifications have been grouped by subjects, 
alphabetically. 
Asphalt, Discussion, in Engineering Record, Vol. 58, p. 31. 

Asphalt Pavements, Richardson (Wiley) ; Asphaltic Oils (Hot Treatment), 
Engineering- Contracting, December 8, 1909; Asphalt Macadam y Munici- 
pal Engineering, October, 1909, p. 274. 
Cables. 

Single Condtictor, Intermediate Cable, Type 44, ^419, U. S. Signal Corps; 
Electric Wires and Cables, ^15Wl, United States Navy Dept. ; Twisted 
Pair Outside Distributing Wire, N. E. T. & T. Co. ; Construction of High 
Tension Power Transmission Lines above Telephone Wires, Am. Tel. & 

289 



Note 20 APPENDIX NOTES 

Tel. Co. ; Galvanized Steel Wire, jj:2965, Am. Tel. & Tel. Co. ; 10,000 pound 
Strand, §2881, Am. Tel. & Tel. Co. 

Coal. 

Coal, #10, International Paper Co.; Coal, Purchased for New York City, 

Engineering News, September 9, 1909. 

Concrete. 

Portland Cement, American Society Testing Materials. Available from 
most cement companies; Pavement Foundations. Pamplilet issued by 
Warren Bros. Co., Boston, Mass., and in Engineering-Contracting, Novem- 
ber 10, 1909; Granolithic Mill Floors, Aberthaw Construction Co., Boston, 
Mass. in Engineering-Contracting, June 1, 1910; Concrete and Railway 
Masonry, Baker's Masonry, Appendixes II and III, 3d edition, 1909. 

Chemicals. 

Alum, §18, International Paper Co.; Aluminum Hydrate, §25, Interna- 
tional Paper Co. ; Bleach, §17, International PaperCo. ; Disinfectant, §27 A , 
Penn. R.R. Co. ; Lime, §2, United Box Board & Paper Co. ; Manganese 
Dioxide, §3, Carolina Glass Co.; Nitre, §^, Carolina Glass Co.; Oil of 
Vitriol,§14, International Paper Co. ; Sal Ammoniac, §24S6, United States 
Navy Dept. ; Soda Ash, §101, A. D. Little Standard; Soda Ash, §5, Am. 
Writing Paper Co. 

Iron. 

Cast Iron Wheels, §1\C, Penn. R.R. Co. ; High Grade Wrought Iron, Bos- 
ton Elevated Ry. Co. ; Merchant Bar Iron, §9C, Penn. R.R. Co. ; Sta^'bolt 
Iron, §98, B. & M. R.R. Co. ; Wrought Iron, Brooklyn Rapid Transit Co. 

Oils. 

Analysis of Dead Oil of Coal Tar or Coal Tar Creosote, §1458, Am. Tel. & 
Tel. Co. ; Asphaltic Oils (Hot Treatment) , (see Asphalt) ; Bituminous Com- 
pound, Boston, City of (Street Dept.) ; Lard Oil, §18, Penn. R.R. Co. ; Oils, 
Am. Bridge Co. ; Linseed Oil, Am. Linseed Co. ; Heavy Machinery Oil, §3, 
Am. Writing Paper Co. ; Turpentine, Southern Railway Co. 

Machinery. 

Elliptic and Semi-Elliptic Springs, Am. Locomotive Co. ; Railway Motor 
Pinions for Motors of 50 H. P. and over, Am. St. & Interurban Ry. Eng. 
Assn. ; Elliptical Springs, §13, Penn. R.R. Co.; Gears, Interborough Rapid 
Transit Co. 

Masonry. 

Concrete and Railway Masonry, Baker's McLsonry, Appendixes II and III, 
3d edition, 1909; Granolithic Mill Floors, Aberthaw Construction Co., 
Boston, Mass., in Engineering-Contracting, June 1, 1910. 

Metals. (See Steel.) 

Babbitt Metals, Interborough Rapid Transit Co.; Bearing Metal, Babbitt 
& Bell Metal, §C.S.12, Union Pacific R.R. Co. ; Ingot Tin, §21T2, United 
States Navy Dept. ; Composition Castings, Brooklyn Rapid Transit Co. ; 
Tin Coating for Copper Wire,§B37, N. E. Tel. & Tel. Co. 

Miscellaneous. 

Dust Preventives. See also Richardson's Asphalt Pavetnents, BuUetin 
#34, U. S. Dept. Agriculture (in Hubbard's Ditst Preventives); bispcc- 

290 



APPENDIX NOTES Note 21 

tion of Material, Parts I and II, United States Navy Dept. ; Symposium on 
Penalties, Damages, Duties of Inspectors, etc., Engineering-Contracting, 
November 17, 1909; Twine, ^28, International Paper Co. 

Paints. 

Brawn Freight Car Color, Central R.R. of N. J. ; Dark Trimming Paint, 
Color No. 2, flfSA, Norfolk & Western R.R. Co.; Freight Car Color No. 
21, §32 A, Southern Railway Co.; Painting All-Steel Cars,§^E6, B. 
& O. R.R. Co. ; Standard Black for Use on Steel or Iron, §58, Superseding 
Experimental Specifications of Sept. 18, 1905, Penn. R.R. Co.; Standard 
Black Paint, §137, Rock Island Lines; Standard Paint Specifications, 
Canadian Pacific Ry. Co.; Tuscan Red, §37 A, Penn. R.R. Co. 

Pavements. 

Brick Pavement, National Paving Brick Manfrs. Assn., Will P. Blair, 
Secretary, Indianapolis, Ind. ; Creosoted Wood Paving Blocks, Tabulation 
of requirements of 14 American cities, in Engineering-Contracting, June 
15, 1910. Pavement Foundations , p&inipblet issued by Warren Bros. Co., 
Boston, Mass., and in Engineering-Contracting, November 10, 1909; BitUr- 
minous Macadam, N. Y. State Highway Speci. and in Engineering-Con- 
tracting, December 8, 1909; Street Roadway Pavements, Samuel Whinery, 
Eng. News Pub. Co., 1907. 

Pipe. 

Seamless Copper Pipe, Iron Pipe Size, §25P2, United States Navy Dept. ; 
Rubber Hose, §101, B. & M. R.R. Co. 

Sewers. 

Sewers, Trenching, Filling, Paving, Masonry, Catch Basins, etc, Charles 
Carroll Brown, Engineering World, October 5, 1906. 

Steel and Structural Work. 

Steel Bridges, different authors, Eng. News Pub. Co. ; Galvanized Sheet 
Steel, §21S1 , United States Navy Dept. ; Steel Passenger and Freight Car, 
Locomotive and Tender Axles, Southern Railway Co. ; Boiler and Fire Box 
Steel, §1A, Penn. R.R. Co.; Electric Wires and Cables, §15W1, United 
States Navy Dept.; Structural Steel, Freitag's Structural Engineering; 
Steel Rails, Comparison of five specifications for modern Bessemer and 
open hearth steels. Railroad Age Gazette, May 21, 1909 ; Spring Steel, Open 
Hearth, §105, B. & M. R.R. Co.; Steel Blooms and Billets for Rod 
Straps and Miscellaneous Forgings,§90, B. & M. R.R. Co. 

Tar. 

Tar, Board of County Road Conomissioners, Wayne County (Pa.) ; Dust 
Preventives, see also Richardson's Asphalt Pavements, Bulletin #34, U. 
S. Dept. Agriculture (in Hubbard's Dust Preventives); Floors with 
Tar Concrete Base and Wood Tops, Aberthaw Construction Co., Boston, 
Mass., in Engineering-Contracting, June 1, 1910. 

Waterproofing. Jour. Assn. Eng. Societies, June, 1910. 

Wire. 

Special Copper Returns on 5th St., etc., §78, appendix 3-8-25-90, Bell Tel. 
Co. of Phila. ; Trolley Wire, Boston & Northern St. Ry. Co. 

App. Note 21. Intention of Parties as to Passing Title. 

Since in many sales the parties fail to express their intention as to when 

291 



Note 22 APPENDIX NOTES 

title shall pass, or express it too vaguely to make their intentions certain, 
rules for construing their intentions from their acts have been developed. 
Several characteristic situations have thus been provided for. 

(1) Sale of a Specific Chattel Unconditionally. Where the subject of 
the contract is agreed upon, and the article is ready for immediate deli\ery, 
the law presumes an immediate passing of title. This rule is never questioned 
where the price has been paid, or where credit is expressly given. Some juris- 
dictions hold that where the sale is for cash, payment is a condition precedent, 
but others follow the English view that title passes, reserving to the seller his 
lien for the price. 

(2) Sale of a Specific Chattel Conditionally. If by agreement something 
remains to be done by the seller to put the goods into deUverable condition, 
title will not pass until such work is done. Thus the testing of a dj-namo, 
or water-wheel, if agreed upon, would be a condition precedent to the passing 
of title. Probably the best authority holds that where the price depends upon 
the quantity or quality of the goods, the weighing, measuring, or testing of the 
goods are conditions precedent to the passing of title. 

(3) Sale of Goods not Specified. Where the sale is of goods not specified, 
but covers, for example, goods to be manufactured though not forming a 
specific lot, title does not pass until there is an appropriation of them to the 
contract. (See § 313.) If the goods are part of a uniform mass, as so many 
tons of rails, so many kegs of spikes, etc., a few American courts hold that 
no appropriation is necessary to pass title. The greater weight of authority, 
however, is to the effect that appropriation is no less necessary- because of the 
above facts. (Grain in elevators forms a recognized exception to the rule.) 

(4) A subsequent appropriation may complete the passage of title where 
the class of goods is agreed upon, though the particular chattels are not 
specified. 

(5) If the goods are to be manufactured upon the order of the buyer, the 
title does not pass until the goods are finished and appropriated to the con- 
tract. In New York this rule has been held to still apply even when the entire 
price has been paid in advance, or where the buyer superintends the work. 

(6) Reservation of the jus disponendi (see § 315) is a highly practical sort 
of construing which the seller puts upon the question of passing of title. By it 
he unequivocally shows that he does not intend the title to pass until the pur- 
chase money is in sight. 

App. Note 22. Advantages in Corporate Form of Organization. 

The advantages of transacting business as a corporation over undertaking 
it individually or as a co-partnership, may be briefly stated as follows : 

(1) There is immunity from individual liability for debts arising out of the 
conduct of the business. (Compare this with the doctrines of partnership.) 

(2) The element of perpetuity for the life of the enterprise is secured, so 
that the death of any of the parties interested does not interfere with the con- 
duct of the business. 

(3) The " good ivill " and prestige of the basiness is not then the property 
of an individual, but belongs to the corporation. 

(4) Capital is readily obtained through the sale of stock, thus doing away 
with the necessity of admitting general or sj^ecial partners into the concern. 

292 



APPENDIX NOTES Note 22 

(5) The sale of bonds, or of preferred stock facilitates the raising of addi- 
tional funds. 

(6) The individual interests in the business may be sold or transferred 
with ease, and it is not necessary to obtain the consent of any third party to 
the sale. 

(7) The danger of being ruined through the dishonesty or extravagance of 
a partner is removed. 

(8) The expense connected with incorporating an enterprise is small. 

(9) More far-reaching and extensive powers are usually conferred upon a 
corporation than are possessed by a partnership or an individual, 



293 



INDEX 



Figures refer to Section Numbers, not pages. 

Agency 



Agency by "Estoppel" 139 

by Implication 139 

Creation of 134 

Defined 132 

liimits on Implied 139 

Proof of 133 

Rests on Contract 133 

Agent, Dealing with 134 

Duties of 147-8 

Engineer as 135, 152 

"Holding out" 139 

Instructions to 149 

"Judicial Acts" of 138 

Notice to 148 

Power to Appoint 132 

Tort of 150(2) 

Agent's Authority 135 

Misrepresenting 151 

Scope of 135 

Summarized 146 

Agent's Liabilities to Third Per- 
sons 150 

Assignment of Contracts 145 

Attorney in Fact 134 

Choice of Parties Bound 144 

Creation of Agencj'' 134 

Custom and Usage 146 

Delegation of Powers 136 

Duties of Agent 147-8 

Duty in Dealing with Agent .... 134 



Employment of Engineer 153 

Engineer as Agent 135, 152 

Employment of 153 

Undertaking of 153 

Essentials to Ratification 142 

"Holding out" 139 

Implied Authority 135, 146 (2) 

Ratification 140 (2) 

Incidental Powers 146 

Instructions to Agent 149 

"Judicial Acts" of Agent 138 

Limits on Implied Agency 139 

Misrepresenting Agent's Author- 
ity 151 

Notice to Agent 148 

Power of Attorney 134 

Power to Appoint Agent 132 

Proof of Agency 133 

Ratification of Agent's Acts 

140, 146 (5) 

Scope of Agent's Authority 135 

Secret Instructions to Agent. . . . 149 
Summary of Agent's Authority . 146 

Supervi.sory Delegation 137 

Tort of Agent 150 (2) 

U^ndertaking of Engineer. ...... 153 

Undisclosed Principal 143-4 

Unknown Principal 142 (6) 

Warranties of Engineer 153 

Who may Ratify 141 



Contracts 



(Chapters 

Acceptance of Contract 63 

Accord and Satisfaction 108 

Additional Plans, etc 1 16 

Work 114 

Adequate Consideration 43 

Agreement Enforced as Made. . 123 

or Mutual Assent 51, 52 

Aim in Contract-Writing 84 

Alterations 109 

May Release Surety 32 

Approval of Work 73 

Argument for Definiteness. .. 117, 118 

for Study of Contracts .... 84 

Arbitration upon Extras 1 16 

"At Their Peril" 25 

Basic Position of Contracts. ... 20 
Bidders, Instructions to 62-66 



II and III) 

Breach in Engineering Con- 
tracts 124-128 

in General .122,123 

Cancellation and Abrogation 

Clauses 106 

Common Law 21 

Words Have Technical 

Meaning 22 

Compensation, Damages as. . . . 130 

Competent Parties 23 (1) 

Concurrent Conditions 77 

Conditional Contract 71 

Liability 73 

Ofifers 62 

Conditions in Measurements, . . 73 

Precedent 73 

Subsequent 75, 76 



294 



INDEX 



Figures refer to Section Numbers, not pages. 



Condi ti ons — Con . 

Summarized 79 

to Receiving Payment .... 73 

Conduct of Parties 82 

Conflict of Laws 88-91 

in Writing and Printing. . . 83 

Consideration 36 

Adequate 43 

Failure of 50 

Forbearance as 36 

Impossible 44 

Kinds of 42 

Mutual Promises 40 

New 110,111 

Proof of 48 

Construction, Importance of 

Rules 47 

of Contracts 80 

Principal Rule of 81 

Contingent Events 71 

Contract, Acceptance of 63 

Conditional 71 

Defined 17 

Elements must be Found . . 17 

Engineer Enforces 92 

Essentials 18 

Implied 68-70 

Incompetency in Illegal. . . 70 

Intention to 69-72 

Offer to 62 

of Suretyship. . . App. 15 and 32 

Parties Bound in 23 

Performance of 94 

Place of Making 89-91 

Writing, Aim in 84 

Contractor Refuses to Perform. 39 
Contracts, Basic Positions of . . . 20 

Construction of 80 

Contrary to Public Policy. 33 

Discharge of 93 

Divisible 101 

Engineering 124-128 

Express 60 

How Made 61 

Implied and Quasi- 129 

in Restraint of Trade 27 

Interpretation of 80 

in Violation of Statutes. . . 25 
Involving Public Policy ... 34 
Opposed to Common Law . 30 

Severable 101,102 

Supplemental 112, 113 

to Bind Third Parties ..... 31 
Covenants Dominate Specifica- 
tions 83 

Custom and Usage 85-87 

Damages as Compensation 130 

Indirect, 130 



Damages — Con. 

in General .,.,...... 130 

Liquidated and Unliqui- 
dated 131 

or Performance 96 

Remote 130 

Default by Contractor 76 

Dependent Conditions 77, 78 

Discharge by Agreement .... 105, 106 

by Alteration 112 

by Payment 121 

by Waiver 107 

of Contracts 93 

Divisible Contracts 101 

Duress 58 

"Enabling Statutes" 23 

Engineer Enforces Contract. ... 92 

Foresight by 123 

Engineering Contracts, Extent 

of 82 

Engineer's Power as to Extras. 116 

Entry by Owner to Complete . . . 126 

Equity, Origin of 95 

Exoneration from Performance. 128 

Exorbitant Price for Extras. ... 115 

Express Contracts 60 

and ImpUed Conditions ... 72 

Extras 114-116 

Arbitration upon 116 

Exorbitant Price for 115 

Fixed by Net Cost 120 

Litigation over 118 

Price of 120 

Failure of Consideration 50 

to Perform 122 

Fields of Law Named 35 

Forbearance as Consideration . . 36 

Foresight by Engineer 123 

Formality in Acceptance 64 

Fraud, Elements of 57 

Gratuitous Promise 38, 39 

Implication of Illegal Contract 70 

Implications of the Language. . 85 

Implied Acceptance 64 

and Quasi-Contracts 129 

Contract 68-70 

Importance of Rules of Con- 
struction 47 

of Technical Terms 22 

Impossible Consideration 44 

Performance 45, 46, 98 

Incompetency in Illegal Con. 

tract 70 

Inconsistent Matters 81, 82 

Indirect Damages 130 

Inferences to be Taken 68 

Insane Persons, Contracts of . . . 23 

Intention to Contract 69-72 



295 



INDEX 



Figures refer to Section Numbers, not pages. 



Interpretation of Contracts 80 

Jurisdiction of Equity 96 

Kinds of Consideration 42 

Language in Conditions 74 

Law and Equity 95 

Law'ful Subject Matter 24 

Varieties of 35 

Legal Counsel Required 25 

Legal Rules 21 

Legislative Restrictions 25 

Lex Fori 91 

Lex Loci Contractus 89 

Lex Loci Rei Sitae 90 

"Lien and Labor" Laws 26 

Limitations of the Language. . . 68 

Litigation over Extras 1 18 

Lump Sum Plus Cost 120 

Mailing Acceptance 63 

"Meeting of the Minds" 51-60 

Misrepresentation 56 

Mistake as to Person 54 

to Subject Matter 55 

to Transaction 53 

Defined 53 

Mutual Conditions 77 

Demands and Compromises 41 

Promises 37 

Net Cost, Extras Fixed by 120 

New Agreement Annuls Old 106 

New Consideration 1 10, 1 1 1 

Nominal Damages 130 

Non-Delivery of Acceptance. . . 63 

Offer and Acceptance 60 

of Performance 97 

to Contract 62 

Oral Contracts, Effect of 29 

Testimony 81 

Ouster of Courts 33 

Parties Bound in Contracts .... 23 
Payments, Practical Sugges- 
tions 119 

Penalties in Contracts 131 

Performance, Exoneration from 128 

Impossible 45, 46, 98 

of Contract 94 

or Damages 96 

Offer of 97 

Specific 95,96 

Substantial 99, 100 

Summary of 103, 104 

Tender of 97 

Perform, Failure to 122 

Place of Making Contract 89-91 



Practical and Equitable Con- 
tracts 16 

Suggestions on Extras 1 19 

Price of Extras 120 

Principal Rule of Construction. 81 

Proof of Consideration 48 

Proposals for Work 66 

PubUc Notices 66 

Offers 66,67 

Policy Defined 33 

Quantum Ad emit 100, 128, 129 

Quasi-Contracts 129 

Question of Consideration ... 110, 111 
Reasons for Unfair Require- 
ments 16 

Receipt of Revocation 65 

Relative Importance of Parts. . 83 

Remedies for Breach 128 

Remote Damages 130 

Rescind, Agreements to 107 

Revocation of Contract 65 

of PubHc Offer 67 

Right to be Heard in Court. ... 33 

Rules of Construction 80 

Satisfaction of Owner 84 

Seal 49 

Sealed Instruments 112 

Severable Contracts 101, 102 

Sound Interpretation of Con- 
tracts 19 

Specific Performance 95, 96 

Statute of Frauds 29 

Statutory Debt Limit 25 

Substantial Performance 99, 100 

Suit for Breach 129 (3) 

Summary of Conditions 79 

of Performance 103, 104 

Sunday Laws 28 

Supplemental Contracts 112, 113 

Suspension, Breach by 124, 125 

Surety Bonds 31 

Technical Terms in Law 22 

Useof 81 

Tender of Performance 97 

Transit Case 69 

Unconditional Acceptance 64 

Undue Influence 59 

Unit Prices and Extras 120 

Universal and Uniform Usage. .86, 87 

LTnjust Enrichment 129 

Usage and the Common Law. . . 85 

Waiver 107 

Weight of the Parts 83 

Withdrawal of Offer 65 



296 



INDEX 



Contract-Writing 

Figures refer to Section Numbers, not pages. 



Additional Plans 420 

Aim in Specifications 452 

Ambiguity and Inconsistency . . 455 
Amer. Ry. M. W. Assn., Report 

on Uniform Contracts 409 

Analysis of Examples Necessary 

466, 467 
Analyze Principles, Purpose of 

Book to 468(6) 

Anticipated Profits 424 

Anticipatory Breach 418 

Arbitration 433, 487-9 

Argument for Studying Con- 
tracts 441 

Arrangement of Clauses 394 

Ashlar Masonry 484 

Assignment of Contract 145, 428 

Attestation Defined 411 (7) 

Bad Specifications, Omissions . 454 

Bankruptcy of Contractor 432 

Bond for Performance 432 

Brevity 459 (2) 

Building Agreement 443 

Bulkiness and Ambiguity 405 

Businesslike English 392 

Business Principles in Contract- 
Writing 399 

Cement 482 

Central Purpose must be Stated 467 

Changes or Alterations 32,109,424 

Checking Documents 444 

Coffer Dams 478 

Company's Protection and Se- 
curity 432 

" Compiling " Specifications. . . 453 
Components of Contract Forms 410 

Concrete Masonry 483 

Conduct of Work 423 

Conflict between Plans and 

Specifications 420 

Conformity to Plans 419 

Contents of General Conditions 

412 (6), 413 

of Specifications 451 

Contract, Uniform Amer. Ry. 

M. W. Report 409 

Assignment of 145, 428 

Duration of 418 

Fairness in 427 

Forms, Components of . . . . 410 

Forms, Uniform 409 

Includes Specifications. ... 391 
Law Applies to Engineering 

Contracts 408 

Principles, Argument for 
Studying 441 



Contract — Con, 

Qualifications for Inter- 
preting 458 

Scope of...... .. 445(3) 

Severity of Task in Draw- 
ing 404 

Spirit and Intent 417-420 

Understanding the 414-416 

Writing, Business Principles 

Necessary 399 

Writing, Engineer's Prep- 
aration for 398 

Writing, Importance of.. . . 404 

Writing, Planning 403 

Contracts, Practical Conclusions 

on Contents 403 

Language to be Used 392 

Limitations of Uniform . . 413, 442 
Notebook Method of Study- 
ing 467 

Standardizing 461-463 

Contractor, Bankruptcy of 432 

Delinquency of 431 

Notices to the 423 

Responsibility of 414 

Sub- 428 

Contractor's Errors 426 

Plant, Use of 431 

Risks and Obligations 426 

Understanding 414 

Copying Provisions Inadequate 

468 (a) 
Covenants and Specifications, 

Contents of 402 

" General " Clauses, Con- 
tents of 401 

Defective Work 422,474 (15) 

Definiteness 460 (3) 

Definition of Terms 435, 445 (4) 

Delinquency of Contractor. ... 431 

Disputes and Arbitration 433 

Documents " Signed and At- 
tached " 407 

Drawings 446 

Duration of Contract 418 

Duties of the Engineer 438 

Earth Excavations 479 

Engineer and Legal Assistant. . 391 

Duties of the 438 

Final Decision by 439 

Engineer's Estimate, Respon- 
sibility 415 

Engineer Furnishes Specifica- 
tions 391 

Importance of Contract- 
Writing to. , , , , , , 404 



297 



INDEX 



Figures refer to Section Numbers, not pages. 



Engineer — Con. 

Overzeal of 400 

Powers of the. 420, 421, 433, 438 
Engineering Practice, Standard 470 

Engineer's Authority 490 

Duty to Prevent Lawsuits. 400 
Preparation for Contract- 
Writing 398 

EngHsh Practice Adopted 462 

Errors and Omissions 419 

Exact Language in Specifica- 
tions 449, 460(1) 

Examples of Skeleton Specifica- 
tions 471-2 

Exhibiting Plans 407 

Extension of Time 418, 492 

Extras, Ordering 440 

Written Orders for 425 

Extra Work 425, 451 

Failure to Compl}^ with Terms. 431 

Fairness in Contract 427 

Familiarity with Details 468 (a) 

Final Decision by Engineer .... 439 

Foundation Piles 481 

General Conditions in Building 

Agreement 443 

Practical Suggestions for. . 409 
Clauses in Specifications . . 465 
Clauses or Covenants, Con- 
tents of 401 

Provisions (Charles River 

Dam) 474-6 

Guaranteeing Estimates 415-421 

Guaranty of Plans 419 

Identity of Document 406 

Implied Warranty, in Specifica- 
tions 457 

Importance of Contract-Writing 

to Engineer 404 

Impracticable Requirements. , . 453 
Inconsistency in Specifications. 456 
Incorporation by Reference .... 405 

Physical 407 

Usefulness of 405 

Words of 405 

Indemnification 432 

of Surety App. 15 

Language of Specifications. . . . 

392-6,459(1) 
Language Used in Contracts. . . 392 
Lawsuits and Bad Specifications 400 

Legal Questions Involved 470 

Length Immaterial 408 

of Specifications 395 

liimitations of Uniform Con- 
tracts 413,442 

Lines and Levels 447 

Liquidated Damages 496 



Lists of Headings, Purpose of. . 469 

Litigation 434 

Materials, W^orkmanship 445 (2) 

Measurement of Quantities. . . . 421 

Mistakes in Plans 398 

Mode of Studying Specifications 466 
Movement toward Standard 

Clauses 461 

Notebook Method of Studying 

Contracts 467 

Notices to Contractor 423 

Omissions in Specifications 454 

Opening up Work 491 

Ordering Extras 440 

Outline Examples, Purposes of 467 

Overzeal of Engineer 400 

Ownership of Materials 181, 422 

Parties Described 411 (2) 

Payments 429, 494-5 

Physical Incorporation 407 

Planning Contract- Writing 403 

Plans and Specifications 419 

Poor Specifications Need In- 
terpretation 458 

Powers of Engineer. . .420-21, 433-38 
Practical Conclusions on Con- 
tents of Contracts 403 

Practical Hints on Specifications 459 

Problems Always Different. . . . 468 

Proper Agreement Form 411 

" Proper and SuflFicient " 460 

Purpose of Specifications. ..... 397 

Qualifications for Interpreting 

Contract 458 

Reasons for Imperfect Specifica- 
tions 450 

Repetition of Words 396 

Repugnancy, Discussed 413 

Responsibility of Contractor. . . 414 

of Engineer for Estimate. . 415 

Rock Excavations 480 

Schedule of Unit Prices 430 

Scope of Contract 417, 445 (3) 

of Specifications 452 

Settling Disputes. . '. 433 

Severity of Task in Drawing 

Contract 404 

Simple, Explicit Language Aids 

Court 393 

Skeleton Specifications, Reasons 

for 468 

Specifications 448 

(Charles River Dam) 478-84 

Aim in 452 

Bibliographv of App. 20 

"Compiling'' 453 

Conflict between Plans and 420 

Contents of 451 



298 



INDEX 



Figures refer to Section Numbers, not pages. 



Specifications — Con. 

Contents of Covenants .... 402 

Contract Includes 391 

Engineer Furnishes 391 

Examples of Skeleton 471-2 

Exact Language. . . .449, 460 (1) 

General Clauses in 465 

Implied Writing in 457 

Inconsistency in 456 

Language of 392-6, 459 

Lawsuits and Bad 400 

Length of 395 

Mode of Studying 466 

Omissions in. 454 

Plans and 419 

Practical Hints on 459 

Purpose of 397 

Reasons for Imperfect,. . . . 450 

Reasons for Skeleton 468 

Scope of 452 

Severity Aimed at Dishon- 
esty App. 18 

Subdivisions of 464 

Supplement Plans 449 

Up-to-date 397 

Warranties in 456 

Specification Writing an Art 397 

Difficulty of App. 17 

Specific Clauses, and see 

EXAMPLES II and III . . 464 (6) 

Specific Clauses on Concrete 

Work 501 

Erection of Steel Work . 502 
Mains, Water and Gas . . 501 
Maintenance of Struc- 
tures 498 

Old Buildings 498 

Piles 500 

Sewers 501 

Stone Masonry 501 



Specific Clauses — Con. 

Statutory Require- 
ments App. 6 

Terminal Tracks 503-5 

Waterproofing 502 

Spirit and Intent of Con- 
tract 417-420 

Standard Clauses 486 

Engineering Practice. . . 470 

Standardizing Contracts. . . . 461-463 

Subcontractor 428 

Subdivisions of Specifications 464 

Suggesting Headings 469 

Superintending the Work 423,474 (7) 
Systematically Planning 

Writing 403 

Termination of Contract. . . . 493 

Time of the Essence 411 (4) , 418 

Extension of 492 

Transportation 437 

Trouble Breeders in Speci- 
fications App, 19 

True Economy in Good 

Specifications App. 18 

Understanding the Contract. 414-416 
Uniform Contract Forms . . 409 

Uniformity of Treatment 460 (4) 

Unnecessary Risks Cost 

More App. 18 

Up-to-date Specifications . . . 397 

Usefulness of Incorporation 405 

Use of Contractor's Plant ... 431 

Variation in Problems 468 (6) 

Warranties in Specifications. 456 

Implied . .' 457 

Words of Incorporation 405 

Workmanship and Materials 422 

Writing Systematically 

Planned 403 

Written Orders for Extras . 425 



Corporations 



Articles of Association 247 

Borrowing by City 264 

Capital Stock Defined 255 

Charter, Acceptance of 242 

is a Contract 242, 243 

to be Granted 242 

Close Corporation By-Law 262 

Common and Preferred Stock. . 257 
Confidential Relation of Part- 
nership 240 (c) 

Construing the Charter 248 

Contract of Membership 248, 256 

Corporations, Civil, Private. . . . 239 
Defined 238 



Corporations — Con. 

Dissolution 254 

Ear-Marks 241 

Essentials of 242 

"Habit" 246 

Holding Stock in Other 

Companies 262 

Implied Powers 248 

Kinds of 239 

Officers and Trustees 252 

Powers not Possessed 250 

Promotion of 244 

Residence of 238 

and Partnerships Comp . . . 240 



299 



INDEX 



Figures refer to Section Numbers, not pages. 



Debt Limit of City 264 

no Defense in Tort 264 

Delectus Personalis 240 

Director's Liability 245-261 

"Distinct Entity" Theory. 238, 240(6) 

Dividends, Right to 259 

Estoppel Defined 249 (4) 

Fire Departments 264 

FuU-Paid Stock 257 

Incorporation 246 

under General Statutes .... 247 
Incorporators as Copartners. . . 245 

Increasing Capital Stock 258 

Kinds of Stock 257 

Liability, Director's 245-261 

in Tort 253 

of Municipality in Tort. . . . 265 

of Stockholder 240 (3), 260 

Municipal Corporations 263 

Charter Powers 264 

Municipahty, Changing Street 

Grades 265 

Unsafe Streets 265 

Negligence of City Officials 264 

Non- Assessable Stock, Meaning 

of 257 

Non-compliance with Statute . . 245 
Other Forms of Association. ... 241 

Partner and Shareholder 240 (2) 

Partnership Rests on Contract. 240 (a) 



Promoter's Responsibilities. . . . 244 

Promotion 244 

Public Corporations 263 

Parks 264 

Right to Transfer Stock 262 

Sewers 265 

Special Statutory Liability 260 {b) 

Stock and Capital 255 

Certificate 257 

Common and Preferred 257 

Full-paid 257 

Holder's Liability ... 240 (3), 260 

Increasing Capital 258 

Kinds of 257 

Meaning of Non-Assessable 257 

Ownership, Incidents of . . . 259 

Subscriptions 245 

Subscription, Unpaid . . . .260 (a) 

Transfer, Mode of 262 

Watering 258 

Subscription for Capital 245 

Surplus, Rights in 259 

Theory of Corporate Powers 243 

Transaction of Business 251 

Transferability of Shares 240 

Ultra Vires Defined 248 

Modern View 249 

Status of Contract 249 

Unpaid Stock Subscription . . . 260 (a) 

Water Supply of City 264 



Introduction 



Analysis of Engineering Profes- 
sions 1 

Argument for Business Study. . . 6 

Authorities Quoted 15 

Business, Argument for Study 

of 6 

Contracts Underlie 11 

Engineer Must Understand 4 

Fields, Engineering- 8,9 

Man, Training of 4 

Men, Responsibilities of 6 

Training for Engineers 6 

Commercial Engineers 10 

Contracts of Business 13 

Cost Data. Study of 4 

Duties of Engineer 5 

Duty of Engineering Schools.. . . 7 

Economical Buying 8 

Engineer, Business Training for. 6, 7 

Duties of 5 

Managerial Positions for. . . 2 



Engineering-Business Fields 8,9 

Industrialism and 3 

Professions, Analysis of. . . . 1 

Salesmen 9 

Schools, Duty of 7 

Engineers, Commercial. 10 

Relation to Society 2 

Successful Commercial 4 

Ignorance of the Law 15 

Importance of Business Study 

to Engineers 1 

Industrialism and Engineering. . 3 
Legal Framework of Society. ... 15 
Legal Information Required. ... 5 
Managerial Positions for Engi- 
neer 2 

Practical vs. Theoretical Studies 7 

Purchasing Agent 8 

Purpose of This Book 12 

Responsibilities of Business Men 6 

Training of 'Business Man" 4 



300 



INDEX 



Miscellaneous 

Figures refer to Section Numbers, not pages. 



Abandonment App. 7 

Accidents 160 (5) 

"Action on The Case" App. 8 

Actual Damages App. 9 

Adverse Possession 204 

Arbitration — see Contracts, etc. 

Clauses, Court's Position App. 2 
Assignment of Contracts. . . . 145 

Bad Faith of Engineer App. 4 A 

Bailment 294 

Bibliography of Specifica- 
tions App, 20 

Bill of Exchange 390 

Blanket Clauses Condemned App. 18 

Buying Supplies 8 

Breach, see Contracts, 

by Abandoment App. 7 

Time Limit App, 5 

Certification by Engineer . . . App. 4A 

Changes, Affect Surety App. 15 

City as Riparian Owner, , , , App. 11 

Clear Language App. 17 

Common Law 21,155, App. 7 

Conditions, see Contracts 

and App, 4, and 4A 

Consignment 294 

Corporate Form, Advan- 
tages in App. 22 

Cost-Plus-a-Fixed-Sum Con- 
tracts App, 16 (3) 

Damages in a Compromise . . App, 9 

of Contractor App, 7 

Deeds — see Property, 
Delivery — see Sales, Carriers, 

Neg, Paper, etc. 
Discharge — see Contracts. 

of Surety App. 15 

Dissolution, see Partnership 

and Corporations, 
Distribution of Firm Assets App. 14 

Distinct Entity 238-240 (b) 

Double Profits App, 16 (a) 

Easements — see Property, 

Electrolysis App. 10 and Torts 

Eminent Domain 235 

Estates — see Property. 

Estoppel 139, 249 

Extras — see Contracts. 
Desired by Contrac- 
tor App. 16 (a) 

Affect Time Limit . . App, 16(a) 

Fault of Owner App. 5 

Final Accounting, Partn'p , . App, 14 
Fraud — see Sales, Torts, 
Contracts, etc. 

on Surety App. 15 



Free Passes Discussed App. 3 

Good Faith of Partner App. 14 

Goods — see Sales. 

Identity of Interests App, 16 (c) 

Incomplete Performance , . , App. 7 

Indemnity for Surety App, 15 

Indirect Damages App, 8 

Insolvency 317 

Lateral Support — see Property, 

not an Easement App. 12 

Liquidated Damages , , , .App, 9, 496 

Local Ordinances App, 6 

Lump-Sum Contracts. . .App. 16 (1) 
Manipulation of Specifica- 
tions App, 18 

Mistake — see Contracts and App. 4A 
Modern Technical Problems. App, 1 
Monuments — see Property. 
Negligence — see Torts, etc. 

of Carrier App. 3 

in Lateral Support App. 12 

Notes — see Neg. Paper. 

Nuisance 191-2 

Ouster of Jurisdiction App, 9 

Owner's Risks App, 16 (c) 

Passenger Case App, 4 

Payments 494, App, 21 

Penalties App. 9 

"Percentage" Contracts. . App. 16 (2) 

Political Contractors App. 19 

Prescription — see Property. 

Proximate Cause 159 

Public Policy App. 3 

and Liquidated Dam- 
ages App. 9 

Railroad Passes App. 9 

Ratification 142 

Refusal of Offer App. 4 

Relation of Surety to Spec's. App. 15 

Remote Damages App. 8 

Reservoir Sites, Damages , . App, 8 

Retaining Percentages 495 

Schedule of Prices App, 17 

Sewage Disposal — see Prop- 
erty, and App. 1 1 

Sewers 265 

Specifications, Bibliograph}' 

of App. 20 

Statutory Regulations App. 6 

Street Ry. and Returns App. 10 

Subletting 485 

Subrogation of Surety App. 15 

Suretyship App. 15 

Surveyor, Duties of — see 
Property. 



:oi 



INDEX 



Figures refer to Section Numbers, not -pages. 



"Taking" Property, Com- 
pensation App. 10 

Time of the Essence App. 5 

Trouble Breeders App. 19 

True Economy in Good 

Specifications App. 18 



Types of Engineering Con- 
tracts App. 16 

Unloaded Soil Supported . . . App. 16 

Waiver 107, 174 

Warranty — see Sales, Agency, etc. 
Water — see Property. 



Negotiable Paper 



Accommodation Paper 373 

Party 373 

Agent, Paper of 362 

Alteration Discharges Indorser. 377 

Alterations in Paper 371 

Bank's Duty as to Checks 385 

Bearer, Payable to 359-361 

Bill of Lading 390 

Blank Indorsement 375 

Bonds, Essentials, Uses, etc. 388, 389 

Cancellation of Paper 371 

Cashing Checks, Rules 385 

Certainty of Person 360 

of Sum 357 

Certified Checks 386 

Chain of Credits 378 

Checks 382 

Consideration for Note 373 

Deliyery 368, 369 

in Escrow 369 

Destruction of Paper 371 

Determinable Time, at a 358 

Dishonor 372 

Effect of Dishonor 372 

Essentials to Negotiability .... 356 

Fictitious Person, Payable to. . 361 

Fiduciary's Paper 363 

Fraud in Signing 367 

" Holder in Due Course " 367 

of an Office 360 

Indorsement, Contracts of 374 

Indorsements, The 375 

Indorser's Discharge 378 

Liability 374 

Warranties 376 

Intent in Signing 364 

Joint Signing 366 

Judgment Note 380, 381 

" Law Merchant " 354 

Letter of Credit 390 

Lost Check 383 



Maker's Discharge 371 

Liability 370 

Negotiability 355 

Rules for 356 

Words of 359 

Negotiable Instruments 354 

Who Can Make 362 

Negotiable Paper Defined 355 

Transferring Title of 355 

Payable on Contingency 358 

" Payable on Demand " 358 

to Cash 361 

to Fictitious Person 361 

Payee of Check Identified 382 

Payment by Indorser 377 

Presentment of Check, Time of. 383 

of Note 379 

Time and Place for 379 

Principal Debtor, Maker is ... . 370 

Prior Holder, Agreement with. 377 

Promises Absolutely, Maker. . . 370 

Protest, Effect of 384 

Purpose of Rules 378 

Restrictiye Indorsement 375 

Security of Certified Checks .... 387 

Signing by Agent 362 

Firm Name 365 

Hand of Another 365 

in Principal's Name 362 

Jointly 366 

Negotiable Instruments . 362-364 

Retiring Partner, Binds . . . 365 

Trade Name 365 

Special Indorsement 375 

To Holder or Bearer 359 

To Order 359 

Trustees, Paper of 363 

Unconditional Promise 357 

Usages of Trade, LTniversality of 354 

" Without Recourse " 375 



Partnership 



Agreement Basis of Joint Stock 
Company 292 

Antagonistic Interests of Part- 
ners -oo 

Articles of Partnership 268 



Attachment of Partner's Inter- 
est 282 

Bankruptcy of Firm 281 

Capital of Special Partner 288 

Causes for Dissolution 274 



302 



INDEX 



Figures refer to Section Numbers, not pages. 



Certificate in Special Partner- 
ship... 287 

Corporation and Partnership 

Distinguished 280 

Death of Partner 270 

Delectus Personalis 285 

Dissolution of Joint Stock Com- 
panies 293 

of Partnership 274 

Dormant and Silent Partners . . . 276 

Duration of Partnership 274 

Duties of a Partner 285 

Duty upon Dissolution 275 

Estoppel, Partnership by 270 

Evidence of Partnership 271 

FirmName 273 

General Agent, Partner is 277 

and Special Partners 276 

Good Faith of Partners 285 

"Goodwill" of Firm 273 

"HoldingOut" 269 

Implied Authority of Partner. . . 277 
Incorporated Joint Stock Com- 
panies 292 

Intention, Test of Partnership . . 271 

Joint and Several Liability 279 

Joint-Enterprise and Partner- 
ship 272 

Joint Stock Companies, Char- 
acteristics of 290 

Dissolution of 293 

Incorporated 292 

Transferability of Stock.,. . 290 

Kinds of Partners 276 

Liability in Joint Stock Com- 
pany 291 

Limited Partnerships 286 

Limits on Partner's Power 278 

Losses, How Shared 272 

Name of Firm 273 

of Special Partnership 289 

Negligence of Partner 285 

Notice and Firm Name 273 

Objects of Special Partnership... 286 

Origin of Partnerships 266 

Partner, Capital of Special 288 

Death of 270 

Implied Authority of 277 

Negligence of 285 

Notice by Retiring 269 

Who can be a 267 



Partner's, Antagonistic Inter- 
ests 285 

Duties 285 

Equity 283 

Interest 282 

Liability 279 

Lien 283 

Powers 277,278 

Recompense 284, 285 

Partners, Dormant and Silent.. . 276 

General and Special 276 

Good Faith of 285 

Kinds of 276 

Protection against 283 

Partnership and Corporation 

Distinguished 280 

Articles 268 

by Estoppel 270 

by Implication 269 

Certificate in Special 287 

Defined 267 

Dissolution 274-281 

and Joint Enterprise 272 

Duration of 274 

Evidence of 271 

Name of Special 289 

Objects of Special 286 

Property 273 

Representation as Basis of . 270 

Special 286 

Test 271 

Partnerships, Limited 286 

Origin of 266 

Prior Dealers, Notice to 281 

Profits 272 

Protection against Partners .... 283 

Realty of Partnership 273 

Recompense of Partner 284, 285 

Representation and Partner- 
ship 270 

Retiring Partner, Notice 269 

Sale of Partner's Interest 282 

Secret Profits 285 

Sharing Profits 272 

Special Partnerships 286 

Termination of Liability 281 

Test of Partnership 271 

Torts, Partnership Liability 280 

Transferability of Stock 290 

Who may be a Partner 267 

Winding-up Business 275-285 



Property 

Abstract of Title 218 

Accretion 232 

Adverse Possession, Elements 
of 204,205 



Archaic Language in Deeds 215 

Assertion of Title 206 

Boundary Trees 225 

''Clouded" Title 218 



303 



INDEX 



Figures refer to Section Numbers, not pages. 



Condemnation Proceedings 236 

Control by Monuments 222 

Conveyancing 214 

Covenants of a Deed 216 

of Warranty 216 (^ 

Dedication of Land for Streets... 233 

Deed, Covenants of 216 

Deliver>'of 215(6) 

Essentials of 215 

Executing 215(5) 

Parts of 216 

Premises of 216 

Deeds 203,214 

Archaic Language in 215 

Description in 219 

Registry of 215(6) 

Reservations in 197 

Rules for Construing 220 

Warranty and Quit Claim. . 217 

Definite Channel 185 

Degrees of Ownership 195 

Descent in Fee Simple 196 

Description in Deeds 219 

Disposal of Surface Water. . . . 189, 209 
Dominant and Servient Estates. 199 

Duties of Surveyor 226 

Easements by Prescription 208 

Creation and Extinction of 202 

in Water 208 

Easement Defined 198 

Highway Use 201 

is Appurtenant to Land 199-201 

Eminent Domain 235 

Encumbrances 216 (2) 

Estate Defined 195 

for Years 197 

Estates, Horizontal 180 

in Land 195 

Lesser 197 

Merger of 202 

Essentials of a Deed 215 

Examination of Titles 218 

Executing a Deed 215 (5) 

Extent of "Land" 180 

Fee Simple Defined 196 

Grant Includes What 224 

Highway Use as Easement 201 

Historical Certainty of Words.. . 215 

Horizontal Estates 180 

Judicial Functions of Surveyor . 219 

Land 180 

as a Monument 227 

Modes of Acquiring Title in 203 

"Takings" 237 

Lateral Support of Land 210 

Lesser Estates 197 

Life-estate 197 

Materials of Construction 181 



Merger of Estates 202 

Mill Pond 208 

Privileges 194, 208 

Modes of Acquiring Title 203 

Monuments 221 

Nuisance, Must be no 191, 192 

Obstructions in Water Courses. . 193 

Ownership of Street 201 

in Subterranean Waters.. . . 185 

in Surface Waters 187 

Parts of a Deed 216 

Party Wall 200 

Percolating Waters 185 

Personalty 180 

Pollution of Underground 

Waters 186 

Premises of a Deed 216 

Prescription and Adverse Pos- 
session 204 

Public Policy, Deed Descrip- 
tions 220 

in Construing Descriptions. 229 

Quit Claim Deeds, Legitimate.. . 217 

Railroads, Surface Waters 190 

Real Estate 180 

Realty becomes Personaltv 181 

Registry of Deeds ^ 215 (6) 

Reservations in Deeds 197 

Resurvey, Rules for 226 

Rights of Cities in Surface 

Water 190 

in Surface Waters 188 

Riparian Owners •. , . 184 

Rules for Construing Deeds .... 220 

Ser\itude 200 

Sewage Disposal 192 

Squatter's Title 204 

Statute of Limitations 204-207 

Statutory Dedication 234 

Street Boundaries 230 

Stringing Wires 224 

Supporting Buildings 212 

Surface Drainage, Water 

Courses 189 

Surface Waters Defined 187 

Disposal of 189,209 

Ownership in 187 

Railroad's Duties 190 

Rights of Cities in 190 

Rights in 188 

Surveyor's Dutv 206 

"Tacking" of title 204 

"Taking" of Land 237 

"Thread" of Stream 183 

Title, Abstract of 218 

Adverse Possession 204 

Assertion of 206 

by Accretion 232 



304 



INDEX 



Figures refer to Section Numbers, not pages. 



Title— Con. 

by Operation of Law 232 

by Prescription 204-207 

''Clouded" 218 

Warranty of 216 (4) 

Trade Fixtures 182 

Understanding of Deeds by 
Engineer 214 

Unloaded Land to be Supported 211 



"Unreasonable" Pollution 191 

Vertical Support of Land 213 

Warranty and Quit Claim Deeds 217 

Water 183 

Boundaries 231 

Courses 191 

Obstructions in 193 

Waters, Percolating 185 

What Quantity of Land Passes . 223 



Sales 



Acceptance of Goods 303 

Appropriation, By whom 313 

Arrival of Goods 319 

Bailment Defined 294 

Bill of Lading 321 

Binding the Bargain 305 

Buyer, Insolvency 317 

Non-acceptance by 323 

Remedies of 324 

Carriage Case; a Sale 301 

Carrier, Dehvery to a . . 314, 315, 339 

Caveat Emptor 328 

Check, Payment by 341 

Common Law Sale 302 

Conditional Sales 310 

Connecting Carrier 320 

Consignment Defined 294 

Constructive Dehvery 304 

Continuous Transit 320 

Contract to Manufacture 302 

Creditors, Defrauding 332 

Damages of Buyer 325 

Defences in Fraud 327 

Dehvery, Constructive 304 

of Goods 303,339 

Symbohcal 339 

to a Carrier 314, 315, 339 

Duration of Right of Stoppage. 319 

Effect of Stoppage 321 

Evidence of Fraud 331 

and Statute of Frauds 299 

Examine Goods, Right to. . . . 303, 340 
Executed and Executory^ Sales 

295, 298, 307 

Express Warranty 336 

Formality in Sales 295 

Forwarding Goods 320 

Fraud, Defenses 327 

Evidence of 331 

Illegality and 326 

Inference of 331 

in Sales 326-329 

on Vendor 331 

Proof of 329 

Fraudulent Possession of Goods 331 

Sale 296 



Frauds, Statute of 299, 300 

General Characteristics of Sales 295 

Goods, Acceptance of 303 

Arrival of 319 

Dehvery of 303,339 

Forwarding 320 

Fraudulent Possession of. . 331 

not in Existence 298 

Payment for 341 

Price of 305 

Right to Examine 303, 340 

Wares and Merchandise. . . 300 

lUegahty and Fraud 326 

Imphed Warranty 337 

Incompleted Sale 308 

Incorrect Quantity Supphed. . . 339 

Indorsing Bill of Lading 321 

Inference of Fraud 331 

Insolvency of Buyer 317 

Inspection and Warranty 336 

Installment Sales 294 

Intention of Parties in Sales .... 309 

Jus Disponendi 315, 316 

Latent Defects 328 

Lien of Seller 322 

Manufacturing to Order 314 

Memorandum of Sale 306 

Mutuahty in Sales 295 

Non-acceptance by Buyer 323 

Non-Comphance, Statute of 

Frauds 306 

Part Payment in Sales 305 

Payment for Goods 341 

Price of Goods 305 

Promissory Note, Payment. ... 341 

Proof of Fraud 329 

Remedies of Defrauded Party. . 327 

of Buyer 324 

of Unpaid Seller 323 

Representation and Warranty. 330 

Re-sale by Seller 321, 323 

Rescission of Sale 327 

Re-vesting of Title 311 

Sales Act (Footnote) 294 

Sale by Non-Owner 296 

Example of (Carriage Case) 301 



305 



INDEX 



Figures refer to Section Numbers, not pages. 



Sale — Con. 

Incompleted 308 

Memorandum of 306 

Rescission of 327 

Sales Act (Footnote) 294 

by Sample 338 

Common Law 302 

Defined 294 

of Unappropriated Goods. 312 

on Approval 311 

to Defraud Creditors 332 

Conditional 310 

Executed and Exec'y. . .303, 340 

Formality in 295 

Fraud in 326-329 

Fraudulent 296 

Installment 294 

Intention of Parties 309 

Mutuality 295 

Part Payment 305 

Title in Credit 341 

Warranty 329 

Satisfying the Statute 303 

Seller Protected 316 

Seller's Lien 322 

Sending Non-obligatory 340 

Separation from Bulk 312 



Signing Memorandum 306 

"Something to be Done" 308 

Specific Appropriation 312,313 

Statute of Frauds 299, 300 

Evidence Required by. . . . 299 

Non-compliance with 306 

Satisfying 303 

Stoppage, Duration of Right. . . 319 

Effect of 321 

in Transitu 317,318 

Suit for Price 323 

Symbolic Dehvery 339 

Technical Elements of Fraud . . . 329 

Title from Non-Owner 297 

in Credit Sales 341 

Passes when 307 

Re-vesting 311 

Transit, Continuous 320 

Waiver of Lien 322 

Warrant of Manufacturer 337 

Warranty 335 

and Inspection 336 

Express 336 

in Sales 329 

or Representation 330 

When Does Title Pass 307 

"Work, Labor and Materials" . . 300 



Tort 



Accord and Satisfaction 161 (2) 

Aim in "Independent" Con- 
tractor 173 

Avoidance of Liability by Owner 173 

Bankruptcy and Tort 161 (5) 

Common Law Improved by 

Statute 155 

Interprets Statutes 155 

Complexities of Contract- Writ- 
ing 173 

Contract and Tort Distin- 
guished. 156 

Contracts and Specifications, 

Necessity for 172 

Involve Torts and Agency . 172 

Contributory Negligence 160 (6) 

Control of the Work 175 

Damages in Tort 157 

Discharge of Tort 161 

"Due Diligence" 164 

Electrolysis 168 

Engineering School Courses in 

Contracts 172 

Engineer's Duty as to Negli- 
gence 165, 166 

Explosives, Storage and Hand- 
ling 168 



Implied Authority and Tort 171 

Important Distinction, Agent 

and Independent Contractor.. 173 
Independent Contractor De- 
fined 172 

Inevitable Accident 160 (5) 

Instrumentalities, Tort by 167 

Joint Liability of Agent and 

Principal 170 

Judgment Discharges Tort. ... 161 (3) 

Justification in Tort 160 

Kinds of Tort 158 

Liability in Tort, Sources of . . . . 167 
of Engineer for Negligence. 165 

License in Tort 160 

Mahce 158 

Negligence 164 

Contributory 160 (6) 

Engineer's Dutv 165, 166 

Professional Skill 165, 166 

Test Questions 164 

Nuisance 163 

"Ordinary Care" 171 

Personal Responsibilitj' 159 

Rights 156 

Professional Skill and Negli- 
gence 165,166 



306 



INDEX 



Figures refer to Section Numbers, not pages. 



Proximate Cause 159 

Public Policy and Tort 160 (3) 

Reason for this Book 172 

Relation of Common to Statute 
Law 154 

of Torts to Agency 169 

Respondeat Superior 169 

Self-defense 160 (4) 

Sources of Liability in Tort 167 

Spirit of Engineering Contracts . 174 

Statute of Limitations 161 (6) 

Statutes may Embody Common 
Law 155 

Take Precedence 155 

"Studying" Law 154 

Survival of Tort 161 (4) 

Test Questions in Negligence . . . 164 

in Tort 171 

Tort and Contract Distinguished 156 

Bankruptcy and 161 (5) 

by Instrumentalities 167 



Tort— Con. 

Contracts Involve Agency 

and 172 

Damages in 157 

Defined 156 

Discharge of 161 

ImpUed Authority and. ... 171 

Judgment Discharges 161 (3) 

Justification in 160 

Kinds of 158 

License in 160 

Negligence 164 

of Water Companies 168 

Public PoHcy and 160 (3) 

Relation to Agency 169 

Sources of Liability 167 

Survival of 161(4) 

Test Questions in 171 

Trespass 162 

"Unwritten" Law 154 

Waiver of Contract Rights 174 



307 



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